Fed won't Expand Additional Leverage Rules
The latest wave of sell-offs was triggered by news that the Fed will not expand the additional leverage rules introduced during the pandemic. These rules allowed banks to hold treasury bonds and deposits with light capital requirements. The exception expires at the end of the month, and banks now face the need to either reduce their holdings of treasury securities or raise additional capital in relation to these assets. The market reacted by increasing the yield on US government bonds from the lowest values, and US stocks fell by an average of 0.3% for the day.
News of the third wave of the pandemic continues to arrive from European countries. Various analytical companies have lowered their forecasts for the recovery of the French economy in 2021. A similar situation is predicted in Germany. Analysts from Danske Bank believe that the risk of growth of the pair is reduced, as the Fed will eventually focus on the economic recovery and start talking about reducing quantitative easing and raising rates. The bank slightly lowered its forecasts for the euro/dollar exchange rate to take into account the high probability of a very strong US recovery against the Euro zone. Now analysts expect the pair to fall to the level of 1.1700 within six months and to 1.1500 in 12 months.