Yields on 10-year US Treasury bonds fall to 2-year lows, there is a signal of an imminent recession. In the first quarter, the US economy did not grow as fast as we would like (3% against 3.2% in the first reading), the risks of a single rate cut this year increased. It would seem that all this is not favorable to the dollar, and it is simply obliged to fall, but greenback feels quite confident.
So what is its strength? Maybe the weakness of other major currencies, for example, the euro.
There are rumors in the market that in the near future, the EU may bring Italy to administrative responsibility for violation of the limits of public debt and budget deficit. The amount of the fine is likely to be 3 billion euros. The ECB representative and Governor of the Bank of Spain Pablo Hernandez de Cos warned of the risks of a slowdown in the European economy. He also questioned the forecast for accelerating inflation in the region due to wage growth. The European currency declined, while the "American" strengthened due to its weakness. Another return of quotes under the level of $1.1180 indicates a weakness of buyers, and the risk of resuming the downward movement is also growing.
The trade conflict between the US and China not only continues but also intensifies. From this, the eurozone only gets worse as exports suffer. On the eve, the Chinese press hinted at a secret weapon. We are talking about rare earth metals, which are used in many industries, including the release of high-tech consumer electronics and military equipment. China is known to be one of the main suppliers of rare earth elements to the United States, and rising prices for them can cause serious pain to US consumers.
It is worth noting that Washington this time did not declare China a currency manipulator, so as not to aggravate relations. However, the Ministry of Finance has changed the criteria, and the list of suspects now is not 12 countries, but 21. The States intend to monitor regions with foreign trade from $40 billion or more. A currency manipulator can be called one who often intervenes in the financial market, and also has a trade surplus with the United States of $20 billion. Those who have a surplus above 2% of GDP fall out of favor, earlier it was about 3%. Now, on the blacklist along with China, Japan, Germany, and South Korea are such countries as Italy, Ireland, Malaysia, Singapore, and Vietnam.
The support of "euromedical" on the eve was provided by the growth of the US consumer confidence index. The value of the indicator approached 18-year highs. This makes you think that in the second quarter, the situation will not be as bad as predicted in Macroeconomic advisors, expecting a rise of 1.7%. The leading indicator from the Atlanta Federal Reserve Bank indicates a 1.3% signal, J.P. Morgan insists on 1%.
Now, the EUR/USD pair is trading in a narrow range and is unlikely to go far from the 1.12 mark. The fact is that traders are waiting for the publication of the second estimate of US GDP growth in the first quarter. Market participants are also not in a hurry to force things, because they want to see a report on business activity in China.
The material has been provided by InstaForex Company - www.instaforex.com