· Dollar extends four-month high to euro as recovery outlooks diverge
The dollar hit a fresh four-month high to the euro on Thursday as the U.S. pandemic response continued to outpace Europe’s, which has been hobbled by extended lockdowns and delayed vaccine rollouts.
The safe-haven greenback remained broadly stronger following a two-day rally amid worries ranging from Europe’s third COVID-19 wave and potential U.S. tax hikes to the persistent specter of inflation.
Even Germany’s reversal of a call for a strict lockdown over the Easter period did little to build confidence in the region’s economic outlook, instead compounding discontent with Chancellor Angela Merkel’s handling of the pandemic.
“The weak point in Europe remains around the vaccine rollout amid the rise in new virus cases and the tightening of restrictions ... which likely means the mooted acceleration in Q2 may have to be pushed back by a quarter,” Tapas Strickland, director of economics and markets at National Australian Bank, wrote in a client note.
“The narrative of the U.S. outperforming Europe in the coming quarter remains.”
The euro traded near the four-month low of $1.1809 touched earlier in the Asian session, while a gauge of the dollar against six major rivals hovered just below a four-month high of 92.617 reached overnight.
The dollar gained 0.1% to 108.835 yen, another safe haven currency, as the pair continued to consolidate below 109.
Australia’s dollar, considered a liquid proxy for risk appetite, bounced 0.2% after earlier dipping to $0.7579, the lowest level since Feb. 2.
Inflation could also rear its head as disruptions in the supply chain exert cost pressures for manufacturers, with U.S. factory activity picking up in early March.
Meanwhile in Europe, an unexpected expansion of business activity did little to brighten the mood, with renewed COVID-19 lockdowns in many of the bloc’s member nations meaning the gains may not last through April.
Concerns have been magnified because the third wave of infections is being largely driven by the U.K. strain of the virus, according to Commonwealth Bank of Australia strategist Kim Mundy.
“A significant delay to Europe’s re-opening efforts will only widen the divergence between the economic outlook in Europe and the U.S.,” putting additional pressure on the euro, she said.
In cryptocurrencies, bitcoin continued to swing widely, falling below $52,000 again in early Asian trading before recovering to around $52,667. That is after briefly topping $57,000 overnight.
Less than two weeks earlier, the token surged to a record-high $61,781.83.
· US Dollar Index to test 93.00 as the rebound gathers a head of steam – Westpac
The US Dollar Index (DXY) looks set to test higher levels near term as reopening, vaccination and stimulus produce a strapping rebound despite the Fed’s resoundingly dovish policy track, economists at Westpac inform.
“DXY looks determined to test the top-end of a rough 91-93 range that is likely to form in coming weeks.”
· Forex Today: Dollar holds onto gains, vaccine truce Suez blockage, US jobless claims eyed
Markets are attempting to stabilize after Wednesday's fall, while the dollar is taking a breather from gains. Optimism about an EU-UK solution to the vaccine row is countered by a blockage to global trade in the Suez Canal. Investors await news on US infrastructure spending plans, while jobless claims and final GDP are eyed.
Dollar breather:
The greenback has paused its gains, with EUR/USD holding above 1.18 and GBP/USD consolidating below 1.37. Jerome Powell, Chairman of the Federal Reserve, reiterated his position that inflation will likely be temporary and that the recovery has a long way to run. Ten-year Treasury yields have found their feet above 1.60%.
Tax hikes:
Joe Manchin, the most centrist Democratic Senator, expressed his support for infrastructure spending and tax hikes. His critical backing may open the door to a bill that may boost the economy but weigh on markets and keep returns on debt depressed. President Joe Biden will present his plans on March 31.
US jobless claims are set to show a drop in the week ending March 19 and the final US Gross Domestic Product for the fourth quarter is predicted to confirm an annualized growth rate of 4.1%.
Bitcoin is trading around $53,000, stabilizing after falling earlier in the week. Other cryptocurrencies are similarly bouncing from their lows.
· AstraZeneca says COVID-19 vaccine 76% effective in new analysis, to seek U.S. approval
· COVID-19: EU to discuss boosting vaccine supplies after vow to create 'win-win' situation with the UK
· More than half of Israelis receive both COVID-19 vaccine doses
Israel has administered two doses of COVID-19 vaccine to more than half its 9.3 million population, a health official said on Thursday, a rapid roll-out that has helped the country begin emerging from pandemic closures.
· UK could add France to travel ‘red list’ over virus variants: Boris Johnson
· German COVID-19 cases jump by most since early Jan
The number of new confirmed coronavirus cases in Germany jumped on Thursday by 22,657 to 2.713 million, the biggest increase since Jan. 9 as Chancellor Angela Merkel’s government struggles to agree measures to contain the third wave of the pandemic.
· Hungary flags delay in reopening of schools as COVID-19 cases surge
· India's daily COVID-19 infections rise to five-month high
India added 53,476 COVID-19 infections overnight, the highest daily rise since Oct. 23, the health ministry data showed on Thursday.
India has 11.8 million COVID-19 cases, the third-highest amount behind the United States and Brazil.
The country reported 251 new deaths, taking the overall tally to 160,692, the data showed.
· World GDP Forecasts Revised Up After US Fiscal Stimulus Package
Fitch Ratings-London-17 March 2021: Global growth prospects are improving as fiscal support is stepped up sharply, economies adapt to social distancing and vaccination rollout gathers momentum, says Fitch Ratings in its latest Global Economic Outlook (GEO) released today.
We now expect global GDP to expand by 6.1% this year, revised up from 5.3% in our December 2020 GEO.
· Fitch pegs India’s GDP growth at 12.8%
· U.S. says promoting chip cooperation with Taiwan is a priority
The United States and Taiwan are natural partners when it comes to semiconductors and promoting this cooperation is a U.S. priority, the de facto U.S. ambassador in Taiwan said on Thursday.
Washington has increasingly viewed tech-powerhouse and democratically ruled Taiwan as a key part of its strategy to shift global supply chains away from China, especially when it comes to technology and chip companies.
Speaking at the groundbreaking ceremony for a new chip fabrication plant for Powerchip Semiconductor Manufacturing Corp in central Taiwan, Brent Christensen, director of the American Institute in Taiwan (AIT), said he was there “to restate the U.S. government’s focus on supply chain security”.
· Taiwan says has begun mass production of long-range missile
Taiwan has begun mass production of a long-range missile and is developing three other models, a senior official said on Thursday, in a rare admission of efforts to develop strike capacity amid growing Chinese pressure.
· North Korea missile launch tests Biden administration, Japan Olympics
North Korea launched two ballistic missiles into the sea near Japan on Thursday, Japan’s prime minister said, fueling tension ahead of the Tokyo Olympics and ramping up pressure on the Biden administration as it finalises its North Korea policy.
· Ever Given, the massive cargo ship that ran aground in the Suez Canal, is still stuck
The massive container ship that ran aground in the Suez Canal, halting traffic in one of the world’s busiest waterways, is still stuck after little progress appeared to be made on Wednesday to dislodge the ship.
The ship, called the Ever Given, became horizontally wedged in the waterway following heavy winds. Multiple tugboats were sent to the scene to assist in the re-float operation, which can take days.
· Oil falls as demand concerns trump Suez Canal disruptions
Oil prices fell more than 2% as fresh coronavirus lockdowns revived worries about demand for oil products, even as tug boats struggled to move a stranded container ship blocking crude oil carriers in the Suez Canal.
Brent crude futures slid $1.33, or 2.1%, to $63.08 a barrel at 0559 GMT, after jumping 6% overnight.
U.S. West Texas Intermediate (WTI) crude futures dropped by $1.40, or 2.3%, to $59.78 a barrel, after climbing 5.9% overnight.
Prices, which tumbled earlier in the week on worries about tighter pandemic curbs in Europe and vaccine delays stalling fuel demand growth, sharply reversed on Wednesday on news of the grounding in the Suez Canal, potentially blocking 10 tankers carrying 13 million barrels of oil.
Reference: CNBC, Reuters, Livemint Sky News
Thai
Eng