The past week has been quite interesting in terms of pricing for many asset classes that are quoted against the US dollar. In popular markets, prices have been rising to the delight of bulls. Only dollar buyers could have any reason to complain.
Commodities, stock market indices, cryptocurrencies, currencies of developed and developing economies – all seemed to be rising this week in relation to the end of the previous week. Macroeconomic data showing that the industry is doing very well, even with the increasing number of infections and further restrictions, could be the main driving force for growth and to maintain a good mood. It seems that the worse the prospects for the economy due to the fact that the epidemic is not letting go, the better for the markets, because they count on further support from the central banks. The Fed meeting that took place this week gave investors confidence that the central bank in the U.S. will continue to support the markets until inflation and employment improve, i.e. it will still take 3-4 years. The Fed's dovish stance could weaken the US dollar, which in turn could increase the valuation of anything else that is quoted in the US dollar.
From popular instruments, bitcoin gained about 30 percent in a week. Silver came second with an increase of more than 7 percent. Despite the introduction of the lockdown in Germany, the DAX increased by more than 4 percent in a week, which looks as if investors considered this lockdown to be the last one and started pricing the second half of 2021, where the vaccinations are to prevent the economy from closing in the autumn.
Crude oil added another 4 percent to the growth, rising seven weeks in a row. During this time, the price of a barrel of WTI increased by 40 percent in total, from 34.5 USD to 48.5 USD.
The past week also saw further records on the American stock exchange. Both S&P 500, Nasdaq and Dow Jones were listed on historical highs. Gold, after the previous record-breaking wave of outflow of capital from investment funds, seems to be returning to the favor of investors, which may result in a new impulse after the correction. In the past week, the price of yellow metal rose by more than 2.2 percent, approaching 1900 USD, a level unseen for over a month.
In the currency market, the fall of the dollar could have contributed most to the rise of the British pound, which gained over 2% and reached its highest level since May 2018, overcoming 1.3600, even despite the lack of agreement on brexit. The euro seems to have gained more than 1% and the EUR/USD exchange rate has come close to 1.2300. The US dollar index has consequently fallen below 90 points, its lowest level since April 2018.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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