Risk Aversion Feeding the USD’s Rise


Risk Aversion Feeding the USD’s Rise

MARCH 25, 2021

The U.S. Dollar is trading in stronger ranges across the board as equities took a hit from commentary by the Fed’s chairman Jerome Powell who said the current economic outlook is already pricing in the stimulus as well as the likelihood of all adults being inoculated by the Summer. 


Indeed, this week has been characterized by downward measures and fading optimism, only aiding the buck’s role as a safe-haven. Furthermore, there are physical barriers to trade as an enormous ship commercial ship has been stuck in the Suez Canal since yesterday. There is undoubtedly a lot of tension in oil and commodity markets as a result, naturally reinforcing the greenback surge.

There will be an auction of seven-year dated treasury bonds, which traders will observe as last time the lack of demand for the note caused a major sell-off of government debt. The risk-off sentiment is so strong that even crypto currencies have failed to advance as even BitCoin is down over 5.0% in the past week and a half. While technology flourished for a while, there is a sense of anxiety gripping markets as governments try balancing enthusiasm for vaccines with the need to maintain certain partial shutdowns. Things look very uneven globally, thus no positivity being exuded.

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The Euro is down to its weakest point since mid-November as a combo of bad developments have spurred doubts over the continent’s ability to recover. Germany, where confidence indicators have been rising slightly, has been struggling to control the infection rate and cannot determine if businesses can stay open or not.

Yesterday, Chancellor Angela Merkel reversed her decision to extend the lockdowns, that would even affect essential stores, for the week of Easter. In a rare apology to the nation, the four-term leader explained that her original thinking failed to conceive how people would flood to stores to try getting what they needed prior to the holiday, only worsening the condition they are trying to manage. While some indicators are OK, the whole Euro-zone is coping with COVID rather poorly.


The Pound also fell to its lowest value since early February as the problems int eh Euro-zone are also affecting the outlook for growth in the U.K. With an established disagreement over vaccine trading, the U.K. and the EU are locking horns in a time when cooperation would be most desirable. We will get a look at Retail Sales for February tomorrow and will watch out for any resolution that may come from talks with EU leaders about mending the situation.