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traders seek to close positions before US jobs report, making bets against the trend. The last two weeks, such a trend was rally in the dollar, so in the recent session we saw the USD retreat from highs.
Investors do not understand how to react to currency wars. For a long time, they have focused solely on the monetary policy of central banks, and now they are asking themselves whether regulators will take into account the risks of a slowdown in the global economy? If so, last year's strategy, based on the normalization of monetary policy by central banks-competitors of the Fed, will fail in 2018.
Since the beginning of this year, the yen has strengthened by almost 7% against the dollar, which creates serious problems not only for exports, but also for inflation. I think to restrain "bears" on USDJPY pair is possible only in case of de-escalation of the conflict between Washington and Beijing
The single currency dipped yesterday due to Draghi's comments. In his speech after the decision on the rate, the head of ECB noted that trade conflicts represent risks for the economy and markets. However, the biggest impact on the single currency was made by comments that the ECB intends to keep low rates for a long time after the end of QE.
It seems that the markets are going to do everything possible to return to the "golden mean" scenario for global risky assets, in the hope that the recent shocking volatility was a one-time incident involving an absurd level of debt load amid volatility.
Pound rose modestly against the dollar. When there is a threat of higher volatility over financial markets, neither the monetary restriction nor the "hawkish" rhetoric of the Bank of England are able to return the interest of non-residents to the assets of British issuers. Moreover, a trade deal between London and Brussels remains in question.
US dollar rose after the Fed stressed the positive changes in the economy and raised its forecast for inflation. Although it can strengthen by another 50-100 points against ALL other major currencies, the downward pressure on it is still very strong.
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Transportation costs and surplus stocks in the US mean that producers will continue to sell oil at lower prices than WTI stock quotes. These low prices can become exactly what is needed for China's independent refineries to maintain the rate of return.
Despite high economic indicators and forecasts, the euro was unable to consolidate its achievements after the breakthrough on Wednesday. Although the euro did not react to these changes and Mario Draghi's optimistic statements about economic growth due to his fears about low inflation, I think that the euro's fall will be small.
The most important event for the US dollar this week is Friday's report on employment in the non-agricultural sector. It is expected that the number of employed increased by 200 thousand, but the average salary and the unemployment rate should determine how the dollar will react and what are the investors' expectations before the decision of the Federal Reserve on monetary policy.
Investors do not buy the dollar, preferring to wait for the Congress's decisions on tax reform, but the euro does not have new drivers to continue the rally, which increases the risks of consolidating EUR / USD in the range of 1,172-1,202.