If on Monday, positive sentiments prevailed on world markets, on Tuesday, not a trace of them remained.
Global stock indices are colored red.
The foreign exchange market is showing a bias towards "safe havens".
In particular, such risk-sensitive currencies as the Australian and New Zealand dollars are losing about 0.8% and 1.8%, respectively, against their American namesake.
The USD index is trading up almost 0.5%, close to two-week highs around 91.2 points.
Greenback is strengthening, despite the retreat of long-term US government bond yields from annual highs.
On Tuesday, the 10-year index fell to 1.631% after peaking around 1.754% last Thursday.
If in previous weeks the drop in Treasury yields was perceived as a positive factor, now it reflects the wariness of investors, who, among other things, are concerned about the introduction of new quarantine restrictions in Europe.
Italy announced the third nationwide quarantine for the days of the celebration of Catholic Easter, the French authorities introduced partial quarantines in 16 regions of the country, including Paris. Germany has extended the lockdown until April 18.
According to experts, the extension of social distancing measures and restrictions on trading activities in Europe creates additional risks for the recovery of economic activity in the region, which, in turn, puts pressure on the EUR/USD pair.
According to experts of Berenberg Bank, every month lockdowns reduce the growth of the eurozone economy by 0.3%.
Barclays strategists expect that restrictions on movement in the eurozone will be lifted only by the end of the second quarter, which will weaken domestic demand and, as a result, imports.
The improved US economic outlook stands in stark contrast to sluggish economic growth in the EU, where national governments are faced with an increase in COVID-19 infections and a slow rollout of the virus vaccination campaign. According to analysts, this could provide an impetus for further dollar growth.
The greenback is up about 2% this quarter as the rapid deployment of the COVID-19 vaccine in the United States and the $1.9 trillion stimulus by the Joe Biden administration boosted Treasury yields and prompted hedge funds to cut bearish positions in USD.
The attractiveness of the US dollar has increased even more after the officials of the Federal Reserve made it clear that they would be tolerant of the increase in the yield of US Treasuries.
The European Central Bank, in turn, recognizes the existence of economic problems, which is the reason for the decision of the regulator to accelerate the asset purchase program.
According to the latest figures, weekly PEPP increased to €21 billion, about 50% more than in the previous four weeks.
Also, the ECB's active response to the growth of yields in the EU compared to the passive position of the Fed contributed to the sharp widening of yield spreads in the eurozone. Thus, the yield spread on the 10-year US and German bonds returned to the levels of the beginning of last year. This plays into the hands of the dollar and explains the fact that investors are in no hurry to open long positions in the euro.
"After reaching a local minimum of 1.1836 on March 9, the EUR/USD pair was trading in a narrow range just below the 1.2000 level. The market sentiment against the euro is increasingly becoming bearish," said strategists at MUFG Bank.
"The next key support level for the main currency pair is the 200-day moving average, which is now passing near 1.1860. If this level is broken, the EUR/USD bearish correction is likely to continue," they added.
