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EUR/USD rebounds modestly to 1.0930, US Dollar holds to gains
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EUR/USD dropped for the second consecutive day on Monday. The correction from 1.1070 found support above 1.0900. The US Dollar rose across the board as bets on Fed interest rate cuts later this year pared. Ahead of the Asian session, markets seem calm with the US Dollar holding firm to recent gains.
AUD/USD steady around 0.6200 ahead of RBA minutes
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AUD/USD rebounded modestly during Monday’s American session to the 0.6700 area, avoiding a daily close below the 20-day Simple Moving Average. A stronger US Dollar keeps the risks tilted to the downside. The RBA will release the minutes of its latest meeting.
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On April 18th, the US Treasury revealed that February 2021 showed an unexpected decrease in Capital Flow, with a net long-term TIC flows being far below the expectations set by market analysts. The newly released data indicated that the actual figure was at $71 billion, much lower than the anticipated $101.9 billion.
This news comes amid a troubling situation in the US economy, with the slow recovery from the impact of the Coronavirus pandemic and the unusually high unemployment figures. The $71 billion figure marked an 11.5% decrease from the figure in the previous month. The US economy was expected to receive some boost in Capital Flow with settlement of delayed deals related to mergers and acquisitions that were planned for 2021 but this does not seem to be materializing.
Inflation has gone up worldwide, especially in the US with the Consumer Price Index having risen to 4.2%, its highest rate in the last 12 years. This could be one of the primary factors in the lack of investment in the US economy, which could be a major cause of this unexpected decrease in long-term TIC flows in February.
The long-term figures so far this year suggest a staggering decrease in global investment in the US market, with the first quarter of 2021 showing a net outflow of $20 billion in long-term funds. This is the largest quarterly outflow since 2009, during which a similar outflow of $13 billion was witnessed.
The decrease in global investment in the US economy does not bode well for the recovering country and the US Government must take steps to increase its attractiveness to foreign investors to ensure a more stable economy.
