Greenback Sinks as Global Risk-Taking Rises

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Greenback Sinks as Global Risk-Taking Rises

MARCH 11, 2021

The U.S. Dollar is not a major beneficiary of all the optimism in the air as overnight and this morning all counterparts are appreciating. 

Overview

A combination of less dovish central bank thinking around the globe, the successful passing of the U.S. stimulus package, and a revived sense of risk-appetite are all combining to sink the buck. The Dow Jones Industrial Average moved past 32K, a moment that seems to indicate most business leaders and investors have faith in the economic outlook. Concerns over rising yields and the possibility of unwanted high inflation seem to be fading as financial authorities seem ready and willing to let everything rise as a sign of better economic health.   

We mentioned in yesterday’s morning update how the rescue spending bill in the U.S. could result in momentum against the buck and this indeed materialized. President Joe Biden signed the final copy, and his administration is assuring us that the plan to have enough vaccines for adults that wish to be vaccinated by end of May is working out smoothly.

Jobless Claims figures earlier showed slightly less action than anticipated, but still quite elevated as it is above 700K for initial benefits. This could be reduced significantly, hopefully, as the funds in the rescue package are implemented. We will see more inflationary data in the form of the Producers Price Index tomorrow.


What to Watch Today…

  • No major events scheduled for today

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EUR  

The Euro is rising and getting away from its weakest levels since November as the European Central Bank is making headlines for wanting to leave the financial environment alone, with no added sovereign bond purchases, and no real worry over the possibility of higher inflation or treasury-bond yields. Additionally, the outlook according to the ECB is not a negative one and risks have become more balanced.

In her current live remarks, ECB President Christine Lagarde is saying that while the Euro-zone is not out of the woods, she expects the overall situation to improve this year. Without any changes to loosen monetary policy any further, the ECB is sending a message of positivity that is clearly boding well for Euro prospects after days of warranted skepticism since there are still some items to resolve as the economy attempts to re-open.

GBP  

The Pound took advantage of the general dollar weakness but could go one way or the other tomorrow as a slew of Industrial, Manufacturing, and Construction data is expected to reveal contraction in January. Things in the U.K. seemed to be going better than in the Euro-zone because of the vaccine roll-out, but now economists are starting to worry that post-Brexit life is harder than originally assessed.

A survey of trade and business leaders has found that 74.0% of British firms are experiencing problems with border control and delays. The government is said to be looking to improve the situation, but these woes have been building up ever since the start of the year. We shall see if reality hits Pound value eventually.

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