The global market rally goes on while demand for the safe-haven U.S. dollar ebbed. Investors are taking comfort from the vaccine rollouts and signs of progress on stimulus amid concerns about extended valuations. Stocks are at record highs and Bitcoin surged to a record high on Tesla’s investment in the largest cryptocurrency.
However, there are also some risks since inflation expectations are near the highest since 2013. Investors start to worry whether these valuations are becoming too expensive and when the so-called reflation trade could start to threaten equities. Investors will have to be grappling with these risks as the year goes on.
The U.S. dollar declined amid the market’s increased risk appetite.
EUR/USD: As expected, the euro posted a small rebound and could be primed for a test of 1.2090/1.21. A break above 1.21 could push the pair towards 1.2170 whereas a decline below 1.20 could lead to further losses towards 1.1930.
GBP/USD: The cable was finally able to take out the 1.3750-barrier and seems to be on its way towards 1.38 now. However, we advise caution as the pair enters overbought territory. If the pound falls back below 1.3750 we anticipate a correction towards 1.3710.
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