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20.11.202309:00 Forex Analysis & Reviews: Economic slump in the US spurs risk appetite

Global stock markets remained in a bullish trend last week as investors, influenced by the decline in Treasury yields and government bonds, demonstrated a clear inclination towards risky assets. The position vividly indicates a radical shift in sentiment, favoring the expectation that the Federal Reserve, and likely other central banks worldwide, will end the interest rate hike cycle.

In fact, previously released data on inflation and labor markets pointed to the deteriorating condition of the US economy, providing grounds for halting the rate hike cycle. It also increases the likelihood that the Fed will start gradually reducing rates in the coming year, which would undermine all hawkish statements from Jerome Powell and some Fed representatives.

Discussions in the market already suggest the shifting stance of the central bank to dovish, so any statistical data indicating a downturn will stimulate demand for company stocks. This will also, at the very least, hinder the rise in Treasury yields and consequently exert pressure on dollar.

Market players should look out for the Fed minutes, consumer inflation report from Canada, data on existing home sales in the US, durable goods orders and their volumes, as well as the Purchasing Managers' Index in both manufacturing and service sectors of the US. The Thanksgiving holiday on Thursday will also have a strong impact on activity.

If the data continues to show declining numbers, demand for stocks and Treasury bonds will increase, leading to a fall in their yields. In this scenario, dollar will experience significant pressure, continuing its decline against a basket of major currencies.

Forecasts for today:

Exchange Rates 20.11.2023 analysis

Exchange Rates 20.11.2023 analysis

EUR/USD

The pair trades above the support level of 1.0900. Consolidating further, fueled by weakness in dollar, may lead to a rise towards 1.1000.

USD/JPY

The pair trades above the support level of 148.80. Negative news about the situation in the US economy may exert additional pressure, causing the price to drop below the support level and towards 148.00.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Pati Gani,
Analytical expert of InstaSpot
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