Buck Finds Equilibrium as Risk-Off Sentiment Back

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Buck Finds Equilibrium as Risk-Off Sentiment Back

MARCH 19, 2021

A tumultuous week closes with the greenback mostly positive as a global recovery is expected, but markets are apprehensive with the bumps along the way. 

Overview

Although outlooks are of solid growth, the uneven nature of how COVID-19 is affecting each nation is putting some doubt on just how strong it can be. In the U.S., President Joe Biden announced yesterday that his administration managed to reach 100.0 million vaccines administered by yesterday, weeks ahead of schedule. Meanwhile, even the more advanced economies are seeing a return to infections like in Germany.

Additionally, oil prices are being scrutinized with suppliers worried about demand not meeting expectations down the line. WTI Crude fell by 7.0% in yesterday and overnight sessions. The value of stocks is also up for debate, with rising yields concerning investors far more about inflationary pressures to come than the Fed does. Overall, the week is closing with a sense that there is still a lot of fight left until we are free to all breathe outside and resume the economic activity that will manifest in indicators later.

There is still not enough evidence of labor improving, consumer prices hiking, nor Retail Sales or Durable Goods Orders overwhelming. Real growth will need to show itself and that is when there will be clearer guidance for FX, which at the moment feels to just swing in limited ranges on a weekly basis. News this morning also disappointed on the foreign relations front, as Chinese and American officials trying to have a discussion in Alaska broke into bickering. If the two largest world economies do not feel good about one another, risk-appetite certainly dwindles.


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EUR  

The Euro has fallen by less than half a percent for the week as the EU has dealt with a tough fight against COVID with vaccinations compromised. Today, most nations announced they will return to use after the World Health Organization and the European Medicines Agency both reinforced the idea that the good far outweighs the bad elements found with some patients.

While the safety will remain questioned, traders wonder if people will voluntarily get it as it is hoped by authorities. Plenty of data as we close March will give us data to attempt bringing some life back to the continent and its currently handicapped recovery.

CAD  

The Canadian Dollar was all over the place this week and has fallen after having reached its best value since February of 2018. Oil prices have caused some issues, but the “Loonie” has been particularly driven by a very steady of Bank of Canada that has refused from the start of the pandemic to utilize loose monetary policy too strongly.

In fact, hopes that there are more than enough vaccines for the Canadian population as it plays the role of the exporter, second highest after the U.K., has attracted a lot of CAD action. Economically, the nation has done OK while being able to control much of the spread as well. For now, the currency has behaved as we expected, and we hope we can continue to be the most accurate in foreseeing its direction and swings.

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