Strong Dollar Week as Q1 End Approaches
MARCH 26, 2021
The U.S. Dollar has maintained most of its gains from the week as it is about to close 1.5% stronger, according to the Bloomberg Dollar Spot Index.
As we have discussed, the global enthusiasm experienced weeks prior has basically evaporated as basic analysis of the progress in Q1 leaves the U.S. in a position of privilege as most regions of the world are coping with very slow vaccination roll-outs or not much in stock to make a dent on COVID infections.
The buck’s resurgence only indicates how much doubt there is about an overall recovery and if its pace will be anywhere near the rosy estimates by various economic think tanks. Meanwhile, physical barriers to trade have developed as a commercial ship the size of the Eiffel Tower remains stuck in the Suez Canal, a terrible scene, and a shortage of semiconductors this year is now affecting the manufacturing of microchips and the finalizing of products that need them, such as automobiles.
Yesterday’s Initial Jobless Claims and Gross Domestic Product figures impressed and gave a sense that the domestic economy is on the path to betterment, but today’s release of February income and consumption data shows the U.S. has to climb out of a hole. Personal Income contracted (-7.1%) while Personal Spending fell (-1.0%), both worse than expected and huge disappointments after a double-digit pace of growth in January. Personal Consumption Expenditures only advanced by 0.2%, meaning that demand is low and not much as a threat to bring on outrageous inflation.
What to Watch Today…
- No major events scheduled for today
The Euro is now trading at its lowest point since the start of November as this week displayed the struggles that the continent is facing in trying to eradicate COVID and minimize the negative effects of lockdown measures. While in the U.S. re-opening has been happening in some regions, the Euro-zone’s largest economies are trying to convince their populations that further measures need to take place.
While there was a slight improvement in the relationship with the U.K. after an announcement that conversations led to some understanding and potential “win-win” situation, AstraZeneca still has a long way to go before being fully trusted, so more variety will be needed and faster vaccination. As the economy tries to improve, an official from the European Central Bank commented that they are ready to intervene even before scheduled ECB meetings using the Pandemic Emergency Purchase Program (PEPP).
The Pound had fallen to its weakest since the beginning of February but is trying to mount a bit of a comeback after a week mostly characterized by turmoil and vaccine disappointment. While Prime Minister Boris Johnson managed to make peace with the EU, they announced that exports of EU-made vaccines will only be limited or prevented entirely if the companies hit a production snag. Overall, the U.K. is looking less devastated than its trading partner as Retail Sales for February did better than expected at 2.4% over the 1.7% estimated.