Wednesday, February 21

How dollar growth dynamics affects the market

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What is the dynamics of the dollar growth: expert opinion

Fluctuations in the rate are reflected in all segments of the world economy, but the sharpest leaps are dangerous for developing countries. Traders clearly track currency trends in the stock market to understand the vector of further action. Recently, the dynamics of the dollar growth has increased, although against the background of the Chinese yuan growth it does not seem so critical.
All hopes of experts are aimed at a favorable outcome of negotiations on the trade issue between the United States and China. In case the parties reach an agreement, the currency will stabilize in the market. Dollar growth and yield tracking are very important for specialists, who trade currencies of emerging economies. According to some experts, the outcome of the first phase of trade negotiations can already be incorporated into the prices.
Recently, the currency market experienced a slight shock: the dollar was rising all day long, despite the fact that the yuan rose to a new high. As a result, the duo USD/CNY crossed the threshold at 7.00. If you analyze the situation in more detail, the rise in the U.S. currency occurred before the ISM nonproductive index showed its values, which exceeded the forecast.

The growth dynamics of the dollar is also influenced by the increase in the yield of the US bonds. Here we observe a new maximum in the category of 10 year old securities. Their yield increased even more from the record values in September.
According to experts, an increase in the dollar rate and the yield of bonds may lead to negative consequences for the world market, which is already suffering from political and economic processes. Most of all it will affect the assets and currency of developing countries.
The other day, analysts presented ISM – Business Optimism Index, which determines the state of the U.S. non-production sector. Its results for October exceeded the forecast: the index is fixed at 54.7 with expected 53.5. For comparison, in September ISM was at 52.6. Despite the positive trends, it is clear that it is too early to say that the U.S. economy has started to improve. Doubts cause fluctuations of the index, which do not allow to conduct a thorough analysis of the consumer segment.
If we compare the EUR/USD ratio, we can see that the index is decreasing. The reason for this is the increase in the yield of US bonds. The positive dynamics in the U.S. economy is also influencing, which gives hope that the recession can be avoided.
The growth dynamics of the dollar is changing, and it is quite sharp, which is reflected in the “bulls” and their actions. So far, there is a margin of safety for currencies and their ratios, but at any moment everything can change. Therefore, now you should choose a waiting position until the market stabilizes.

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