U.S. Dollar Strong as Labor Disappoints
MARCH 04, 2021
The U.S. Dollar is trading in favorable ranges across the board ahead of a webinar that will feature statements from the Federal Reserve’s Jerome Powell and data to be released later this morning highlighting Durable Goods Orders and Factory Orders figures for January.
As yields have been rising, so has an appetite for the greenback, which many out there see benefitting long-term from an economic resurgence as a combination of inoculation for virtually all adults and business re-openings can be achieved by the summer. Much of this sentiment will rely on Powell’s stance later in his discussion, whether he decides to continue saying the sudden rise in yields is of no concern since the economy is re-heating up or if he changes tune and sees danger in this development that needs intervention as Europeans have manifested this week.
Additionally, we continue to have labor woes as we try to overcome the damage done by the pandemic. Continuing jobless claims remain high as this morning showed us numbers lower than the expected 750K and came in just below at 745K; while ongoing claims are at 4.295MM as 4.3MM was forecast. We shall see if today FX flows are volatile with the oil production meeting held by OPEX+ members.
What to Watch Today…
- No major events scheduled for today
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The Euro seems to be weakening from the confusion created by rising yields and the potential for higher borrowing costs delaying the desired recovery the continent needs. In the last few days, the European Central Bank has had members opine about the possibility of intervention to help the yield curve and prevent higher costs. Nevertheless, the ECB officially stated yesterday there is no need for drastic action to curb bond yields.
It seems, at least to us, that this issue will not truly go away until COVID does since the pandemic forced a tremendous launch of programs to aid the economy. In turn, as the economy grows, the idea of pricing going up seems inevitable, but the discussion will be centered on how much can it be allowed for all prices and yields to rise. There is a loose monetary policy out there for good reason, maybe no need to focus on how to rein all that in quite yet.
Pound has hit the brakes this week as the buck is the preferred asset at the moment and could lose some more ground if the narrative turns negative over the economy. Chancellor of the Exchequer Rishi Sunak revealed the U.K.’s which certainly gives tax breaks to businesses and support for the furloughed. We do not have a ton of data until next week and any signs of major struggle in comparison to the forecasts will certainly bring the Pound down. Vaccine rollouts continue, but so do lockdown measures and closed businesses.