Dollar retreats as markets greet March on a positive note, stimulus, PMIs eyed

Markets have kicked off March on a positive note after late February’s inflation fears triggered a bond rout and boosted the dollar. Investors are eyeing President Biden’s stimulus package which is set for a battle in Senate. Manufacturing PMIs are closely watched amid fears of overheating.

Risk-on: Stock markets are on the rise and bond yields are retreating – returns on US ten-year Treasuries are around 1.40% at the time writing. The upbeat mood is weighing on the safe-haven dollar, with EUR/USD recovering toward 1.21 and GBP/USD flirting with 1.40.

Stimulus: The US House of Representatives has passed President Joe Biden’s $1.9 trillion coronavirus relief package, which now moves to the Senate. Democrats have the narrowest of majorities in the upper chamber and a ruling against including a hike to the minimum wage complicate the passage. Markets expect a reduced version to pass muster.

Both Biden and Treasury Secretary Janet Yellen urged Congress to approve the bill rapidly. LArger spending could push yields and the dollar higher, while a modest one would prompt the opposite move.

The Reserve Bank of Australia intervened again in markets, scooping up government bonds to keep long-term rates lower. AUD/USD continues rising amid the upbeat mood, changing hands near 0.78. The European Central Bank releases its weekly report on its purchase of debt later in the day amid comments from officials to step in and push returns lower.

Gold is attempting recovery, bouncing off $1,750 after ceding ground last week amid the increase in bond yields.

Lael Brainard, Governor at the Federal Reserve, and John Williams, President of the New York branch of the world’s most powerful central bank, speak later in the day. Last week’s testimony by Chair Jerome Powell served to temporarily soothe investors fearing the Fed may raise rates. Powell is scheduled to speak on Thursday.

China’s Purchasing Managers’ Indexes somewhat missed estimates, yet experts warned that data is skewed due to the Lunar New Year and restrictions related to COVID-19. Final manufacturing PMIs are eyed in Europe and in the UK, while the main release on the day ahead comes from the ISM Manufacturing PMI. The publication serves as the first gauge ahead of Friday’s Nonfarm Payrolls.

Vaccine: The US FDA approved Johnson and Johnson’s single-shot jab against covid and the first inoculations are due out in the next few days. America’s immunization campaign has picked up once again, after a slowdown related to the storm.

Bitcoin has been recovering on Monday after extending its decline over the weekend. Cryptocurrencies have been under pressure after a sharp move higher in mid-February.

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