Global Sentiment Improves, Greenback Dwindles

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Global Sentiment Improves, Greenback Dwindles

MARCH 03, 2021

The U.S. Dollar is trading in mostly tight ranges, mostly weak across the board as the outlook for recovery worldwide from the pandemic improved. 

Overview

The overnight Asian and European sessions witnessed a return to equity gains after falling on Tuesday based on better-than-expected growth data out of Australia, which seems to be recovering at a more rapid pace than previously thought. Q4 Gross Domestic Product growth registered at 3.1% over 2.5% estimated, while Q3 numbers were also revised upward.

The Oceanic powerhouse has been a gauge for the global recovery narrative, which now certainly seems alive as U.S. President Joe Biden announced that the U.S. will have enough vaccines to inoculate every adult by the end of May, two months earlier than what predicted previously.  Economic sentiment has improved, and 5-year inflationary growth expectations stand at a high in a decade. Nevertheless, it seems the Fed is willing to help more and it is looking into the 2008 Operation Twist program to try flattening the yield curve. This would involve reigniting quantitative easing by selling short-term dated treasury bonds and buying long-term dated ones. We shall see how this development plays out and if it sparks trouble for the buck.


What to Watch Today…

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EUR  

The Euro seems stuck and with the potential to lose ground as the COVID situation in Europe seems inconsistent. After much pressure, Germany’s Chancellor Angela Merkel announced a four-step program to reopen the economy, though cases have not slowed down to her satisfaction. The opposite is going on in Italy where a resurgence in cases is making the government rethink the enforcement of some lockdown measures and return to shutting some public spaces.

On the monetary front, bankers across the continent are worried about the possible shake-up of an easy-money environment that could be hurt by rising yields. Purchasing Managers Indices have shown progress, but the recovery in Europe is going slower than elsewhere.

AUD  

With the exception of a few petro-currencies, the Australian Dollar was the best performer against the greenback overnight as the situation in the island nation gives hope for 2021. As a close partner that is immediately affected by Chinese demand, we are monitoring how strong the advancement is there as the rest of the globe catches up in both vaccine distribution and re-opening their respective economies 100.0%. There is a mixed bag of headlines, but a lot of progress has been made. Eventually, it could translate into the weakening buck we sense for the remainder of the year.

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