Daily Market Recap - Dollar holds firm after Biden stimulus proposal

The dollar is consolidating by -0.3 to -0.5% against most currencies (by -0.3% against the euro at 1.1755, -0.5% against the pound and the Canadian dollar).

Only the Yen is weaker against all currencies with a decline of -0.25% against the greenback (to 110.6E) and -0.55% against the Euro.

The movement in the Yen could be explained by the fact that March 31 is the end of the fiscal year in Japan, meaning some profit-taking from Japanese investors may have occurred today. We actually saw the same type of movement last year on March 31 20202, with investors selling after first-quarter gains. These flows tend to be short-lived however and should swing back against the Dollar soon.

All in all, the Dollar index held above 93 after climbing to 93.47. It climbed nearly 90 in early March, on track for its best month since 2016.

That said the Dollar seems weakened by questions about the financing of a plan (called 'Build Back Better') of 2,000Bn in favor of infrastructure projects (over 8 years) which will be quickly adopted by Congress and which will also be a strong creator of jobs (in the sectors of transportation, electric vehicles, water supply, broadband internet, electricity, and semiconductors).

It would be financed by a 28% corporate tax rate (21% on profits outside the country) but the question remains will that be enough to provide a lasting boost to the US economy in the coming years.

The weakness of the dollar seems to have little to do with its 'yield' as OATs, BTPs and Bunds are easing while US T-Bonds are hovering between 1.715 and 1.7300 percent (unchanged).

They did not deteriorate as we have often seen after 'good numbers'. For reference, the Chicago PMI jumped +7pts to 66.3 when it was expected to be only 60.3.

Another 'good number is the US private sector which created 517,000 jobs in March according to Challenger/ADP, slightly exceeding the average estimate of economists: this is a tripling of the 176,000 jobs created in February (revised from an initial estimate of 117,000).

(Chart Source: Tradingview 31.03.2021)

This strong acceleration in job creation in March is mainly due to the 437,000 new jobs generated by the service sector (tourism and catering), while the goods-producing sector created 80,000 jobs (the 'Build Back Better plan will create many more).

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.