U.S. Dollar Strength in the Midst of Market Doubts


U.S. Dollar Strength in the Midst of Market Doubts

MAY 13, 2021

The U.S. Dollar is trading in stronger ranges this morning as markets continue to tumble with plenty expecting the rally and recovery to be at risk as inflationary pressures remain. 


Nevertheless, the oil and gasoline worries are likely to be put to rest by this weekend as the country’s largest pipeline shows confidence in being able to supply at regular levels by the weekend. Still, some are wondering if the Fed has lost control of inflation and risk-aversion has taken hold. Once again, the buck is playing its safe-haven role and the discrepancy in COVID management with a lot of the world has not changed.

While equity exchanges tumble, the greenback could extend its rally and find room for gains with economic data this morning pointing at further progress. Producer Price Index in April expanded 0.4% above its 0.7% forecast, only reinforcing what the Fed has set as expectations for the reflation narrative. We shall see if anything changes as the week closes.

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The Euro is falling a bit as a result of the pessimism that has gripped its equity markets although re-opening is happening throughout the continent. Stocks keep going down as inflation scares those who were already worried about the sustainability of the economic recovery. In Italy, Prime Minister Mario Draghi is hoping to increase spending caps, which might mean butting heads with EU officials over spending limits and deficit requirements.


The Mexican Peso and other commodity-based tender have swung plenty in the last few days as oil-market chaos took over the headlines. Although the connection between oil prices and petrocurrencies has been clear, Canada and Mexico had been seeing better ranges as a result of the improvements North America has shown in handling the pandemic in comparison to other regions. As Latin America starts its inoculation efforts with the help of the U.S., Mexican Peso could have room for growth as it plays a key role in distribution.