Should we keep an eye on shifts in the strength of the U.S. and European currencies?

Should we keep an eye on shifts in the strength of the U.S. and European currencies?

08.07.2021

Yesterday, the three major U.S. stock indices all rebounded, with the Dow Jones Industrial Average closing at $34,681, up 0.30% from the previous day. An OECD report released yesterday stated that "employment levels are not expected to return to pre-pandemic levels until late 2022 or later," reinforcing the view that the economy is still in the midst of a recovery.

With the yield on the 10-year U.S. Treasury note falling below 1.4% to 1.31%—returning to levels last seen in February—the decline in the U.S. dollar has paused. Although GBP/USD rebounded during U.S. trading hours yesterday, it gave up all its gains and fell to this week’s low of 1.375. As GBP/USD continues to decline while being capped by the 75-period moving average on the 4-hour chart, we need to closely monitor whether this trend will continue.

Today’s key economic indicators include Swiss employment data at 14:45 during Asian trading hours, Germany’s current account balance at 15:00, the results of the ECB’s review of its monetary policy strategy at 20:00 during European trading hours, U.S. initial jobless claims and a press conference by ECB President Lagarde at 21:30 during U.S. trading hours, and U.S. weekly crude oil inventories at 24:00.We intend to watch carefully to see how the relative strength between European currencies and the U.S. dollar evolves.