On Tuesday, the US dollar received some support against major currencies and as a traditional safe-haven currency, the yen rose. The catalyst of such dynamics was the revival of fears that the growth of the world economy will continue to slow down.
The International Monetary Fund published its forecast on Tuesday on the dynamics of world GDP, which turned out to be pessimistic and predicts a slowdown in the economic growth rate to 3.3%. Forecasts for Europe and the United States are downward while expectations for growth in the Chinese economy are rising.
On this wave, the stock markets in Europe and the USA fell. Naturally, in this situation, government bonds of economically developed countries, primarily America, began to be in demand. The decline in the benchmark yield of 10-year Treasuries, which began on Tuesday, continued into the Asia-Pacific trading session and the yield was losing 0.36% to 2.490% at the time of this writing.
The fall of the major stock indices took place against the background of profit taking and the appreciation of the dollar, which, however, we believe to be temporary. The reason for this may be the probable hint by the Fed that it may proceed to lower interest rates if the growth of the American economy continues to slow down. This signal can be given in the minutes of the March meeting of the regulator, which will be published today. Investors are waiting for him, as they believe that the decline in the growth of the American economy against the backdrop of external challenges associated with trade wars, as well as Donald Trump's persistent calls for the Fed to begin the process of lowering interest rates, is too significant.
Considering this, it can be assumed that if this probability really appears in the protocol. This will be a new impetus to the growth in demand for risky assets, not only in the US but throughout the world and especially in emerging markets (EM). In this case, the US dollar will be under pressure against major currencies, as well as some currencies of countries with developing economies, including Russia.
At the same time, if such a signal does not follow, the Fed will continue to signal a desire to observe the development of events before taking any measures and this is unlikely to have a strong impact on markets that will continue to stagnate.
Forecast of the day:
The AUD/USD pair is trading above the level of renewed demand for risky assets. If the pair holds above the level of 0.7145, it can continue to grow to 0.7165 with the prospect of an increase to 0.7200.
The USD/CAD pair may continue to fall if the minutes of the March meeting of the Fed published today show the bank's tendency to lower interest rates. In this case, the pair will overcome the mark of 1.3315 and rush to 1.3285. Then, it will possibly move to 1.3250.
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