Greenback remains under pressure, stocks getting volatile.

02/09/2021

The USD continued to decline against most of its major peers on Thursday, with the EURUSD pair trying to settle above 1.1850, while commodity currencies (NZD and AUD) remained the strongest since Friday's Powell speech.

Earlier this week, the CPI inflation in the eurozone soared to 3% year-on-year, well above the ECB’s target, leading to the head of the Bundesbank, Jens Weidmann, to talk about reducing the stimulus. Nevertheless, if the ECB tapers its bond-buying program, it is still months away, so his words failed to inspire any meaningful rally in the EURUSD pair.

Later in the day, US jobless claims will be released. Initial claims are expected to improve slightly to 345,000 from 353,000 in the previous week. In addition, continuing claims should decline further to 2.775 million, from 2.862 million. 

However, yesterday's ADP employment report showed only 374,000 news jobs, a huge miss to the 638,000 new jobs expected, and it was below the lowest forecast polled by economists. Therefore, analysts have reduced their forecasts for Friday's non-farm payrolls. 

On Friday, a weaker number could undermine the Fed's tapering plans, possibly pushing the starting date from November to December. That would most likely be very bearish for the greenback but positive for stocks, metals, and bonds. 

US stock markets are having trouble defending new all-time highs. Both SP500 and Nasdaq indices rose during the EU and US sessions in the last two days, only to erase those gains in the late trading. It looks like bulls are exhausted, and we might see a little correction. Volatility is also picking up, usually a sign that some downward move is about to begin.
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