Dollar King for the Day as Risk-Aversion Takes Hold

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Dollar King for the Day as Risk-Aversion Takes Hold

MARCH 23, 2021

The U.S. Dollar is trading much stronger this morning following an overnight feeling of pessimism over the pace at which the entire world is recovering from the pandemic. 

Overview

While Q1 has offered a tremendous boost to inoculation efforts with renewed activity in certain regions, economists and investors are starting to wonder if the economy is growing faster than its potential or actually slower.

A big part of this risk-off moment as we close March comes with the fact that no economic indicators anywhere have been impressive, much less overwhelming to the point where it can convince any of us the economy will be running to hot soon. The Chicago Fed Activity Index showed that growth may be on the decline as joblessness and pandemic effects have yet to be beaten.

Today we get a glimpse into future major plans for spending here in the U.S. as White House staff will present to Congress a $3.0-trillion plan to rebuild the country’s infrastructure that would come as two separate bills. This comes after yesterdays talk about the need to reform tax policy and go for higher chunks from the highest of incomes. Meanwhile, Fed’s Jerome Yellen and Treasury Secretary Janet Yellen will be giving discussions on the economy to Congress. We will also monitor talk of the Fed’s move towards a central bank digital currencyExpect petro-currencies to continue suffering as WTI Crude is down to its lowest price per barrel since mid-February.


What to Watch Today…

  • No major events scheduled for today

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EUR  

The Euro is slipping and really should merit rapid depreciation after Germany’s announcement that it will go into lockdown in Easter. As the virus continues its havoc throughout Europe, the largest economies are going back to safety measures to, once again, do the best they can to reduce and prevent the current infection rate.

After a promising start to the year, the AstraZeneca set-backs, the awful slowness in distributing the funds agreed on last summer, and no economic indicators giving hope the EU is looking to recharge its strategy. Unlike the U.S., in the EU individuals did not yet get their rescue-package checks. We will get Purchasing Managers Index figures tomorrow that will likely show contractions are indeed all being experienced right now, perhaps with Manufacturing the only exception

GBP  

The momentum is against the Pound as the risk-aversion globally emanates from worries over the relationship between the EU and the U.K. which seems worse than what outside observers imagined. With accusations turned into legal action for breaches of contract, Prime Minister Boris Johnson is doing a round of phone calls to try to ease the tensions. The unemployment Rate showed a bit of decline this morning from 5.2% to 5.0%, but this only measures the last 3 months, and economists are saying it is just due to inactivity in the economy.

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