Rescue Package, Progress in Inoculation, Dollar Up

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Rescue Package, Progress in Inoculation, Dollar Up

MARCH 12, 2021

The U.S. Dollar might squeeze out a half percent raise for the week after up-&-downswings in a crucial week for the fight against COVID.

Overview

Yesterday was a major day for the U.S. as President Joe Biden asked states to work on having adults vaccinated by the end of May so that Americans have a chance to celebrate the 4th of July in groups loving life. Additionally, the official signing of the spending bill means the materialization of something we have been speculating and talking about for months.

The world cannot ignore rising U.S. treasury yields, the strength of U.S. equities, and the potential for 6.5% in economic growth forecast for 2021, thus why the buck is finding a strengthening trend. We will likely continue to see this type of FX action for months as the rest of the globe begins to look for advanced nations to pass on their excess vaccines.

This morning’s Producers Price Index inflationary figures came in as expected for February, showing advancement but not indicative of any unreasonable rise in the price level experienced by suppliers that should worry the Fed. This in turn means it will take a dramatic increase for the rest of the year to have the Fed back away from its accommodative stance.


What to Watch Today…

  • No major events scheduled for today

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EUR  

The Euro roller-coasted a bit and it finds itself even following a week in which the European Central Bank made it clear there is a lot more room for economic growth before they intervene with rising inflation or yields. COVID-wise, the continent seems to be doing better than last month as the vaccine-rollouts continue although there have been idiosyncratic national delays and issues. Some nations said some patients developed blood clots from the Astra-Zeneca vaccine.

Meanwhile, Italian Unemployment went down to 9.2% in Q4 from 9.8% the quarter prior. As we seek for economic indicators improving in the Euro-zone, we will also prepare ourselves for potential political shake-ups down the line as Italian Matteo Salvini and Marine Le Pen in France look to challenge the current governments with bigger right-of-center alliances.

MXN  

The Mexican Peso has improved by over 2.5% this week primarily as a result of the global recovery narrative pushing commodities and particularly aiding the price of oil as the outlook for global growth points at greater demand as summer arrives and “normalcy” in travel attempts to return. While things in Mexico have been less than ideal, there is the belief the resurgence in the U.S, will only translate into much-needed growth for the neighbor down south.

As Latin America also looks to recover from the pandemic woes, watch for MXN to play a safe-haven and improve as it could be a leader in distributing vaccinations across the hemisphere. While this all sounds very optimistic, it is now more comfortable to foresee higher productivity that can get the emerging and developing markets rolling.

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