Global markets were very optimistic yesterday amid extremely disappointing US labor market data and Biden's plan for a new massive program aimed at supporting the economy and citizens of the United States.
On Thursday, there was a publication of another data on the number of applications for unemployment benefits, which were not truly pleasing. They rose by 965,000 last week, which is a recorded growth since August last year. At the same time, the number of applications for the previous review period declined by 784,000 against the forecast of 795,000.
In the wake of this news, the American and European stock market started to decline due to rising fears that labor market problems will continue to weigh on the country's economy. All this, together with the coronavirus factor, is causing widespread concern among investors. Therefore, they are now doubting the ability of the US economy as well as the world, to immediately recover this year.
Yesterday, the US president-elect J. Biden announced a large-scale program to help the country's economy and its citizens worth $ 1.9 trillion, which is a very unusual event and theoretically, should have led to a sharp rise in demand in the stock markets. However, this did not occur. On the one hand, this can be explained by the common trading rule "buy on expectations and sell upon the event", but the reason is assumed to be different. Initially, it seems that investors are uncertain that such a huge amount of assistance can be passed by Congress and then it will be the strongest disappointment. On the other hand, the markets are almost accurately sure that the entire amount claimed is unlikely to be disbursed and that this is more like a propaganda move than reality.
The US dollar's attempt to grow in the currency market amid a wave of negativity was restrained by Fed Chairman, J. Powell's comment, who made it clear that a change in the level of interest rates should not be expected in the near future. However, the growth of the yield curve of government bonds indicates that investors doubt the stability of the regulator. In any case, the consumer inflation data published earlier this week indicate that inflation is rising and if this process continues, the Fed will have no choice but to revise its view on the monetary course.
Analyzing the market situation, we believe that the correction may continue, but only until the Congress decides on support measures. If the measures are approved, an upward reversal with strong growth may occur, but if not, then a possible collapse. But as they say, only time will tell.
Forecast of the day:
The EUR/USD pair is trading at the level of 1.2130. The breakdown of which will lead to its decline to 1.2080.
The AUD/USD pair is consolidating in the range of 0.7660-0.7800. A decline below the level of 0.7740 may lead to a further price decline to the lower border of 0.7660.
