Asian currencies face pressure against a resurgent U.S. Dollar, underpinned by favorable economic indicators that paint a robust picture of the American economy relative to global peers. The predominant factors behind the dollar’s surge include a more rapid pace of COVID-19 vaccination and improved economic prospects in the U.S., particularly when juxtaposed with the Eurozone and Japan.
Key Highlights:
- Major Currency Dynamics: Overnight, the GBP and USD emerged as the top performers among major currencies, with CHF and JPY trailing. Notably, stronger U.S. economic data have reinforced the dollar, putting pressure on gold, which has now retreated below the 1800 mark. Simultaneously, the EUR/USD pair witnessed a significant move, closing under 1.2000.
- Banking and Rates: The Bank of England (BOE) has maintained its stance on interest rates. Recent decisions suggest that the central bank’s inclination toward negative rates is dwindling, if not entirely gone. Market participants now eagerly await the NFP data, with Canadian employment figures expected to be released concurrently.
- Economic Indicators at Play: A visibly steepening yield curve, as denoted by the US10-2yr, emphasizes the vigor of the reflation trade, suggesting investors’ growing confidence in an economic recovery. Meanwhile, oil prices—both WTI and Brent—have surged to levels not seen since the beginning of the year, reflecting robust global demand. Furthermore, global indices remain firmly rooted close to record highs, indicating broad market optimism.
Biden Administration Amplifies Vaccination Drive:
In a bid to expedite the nationwide vaccination campaign and counter emerging, more virulent strains of the virus, President Joe Biden‘s administration has laid out a comprehensive strategy. The White House confirmed that starting next week, a staggering 1 million vaccine doses would be made available to approximately 6,500 pharmacies nationwide.
Additionally, states and territories will receive a boost in their weekly vaccine allocation—seeing an increment of 500,000 doses—bringing the total to 10.5 million. Furthermore, in a gesture aimed at alleviating the financial strains brought about by the pandemic, federal support will be extended to state and local governments, covering previously incurred COVID-19-related expenses.
Dan Mendelson, founder of Avalere Health, commended the initiative to integrate pharmacies into the vaccination drive, highlighting their efficiency in managing high footfalls. He further pointed out that the initially sluggish pace of vaccination could be attributed to states’ limited infrastructure to support a campaign of this magnitude.
It’s worth noting that the idea of partnering with pharmacies was first mooted during the Trump administration in November, even before the vaccines had received approval. Leading chains, including CVS, Walgreens, and Rite Aid, as well as retail giants like Walmart and Costco, are participating in this endeavor. CVS alone anticipates an initial shipment of 250,000 doses, earmarked for distribution across 11 states.
Conclusion:
The convergence of robust U.S. economic data and aggressive vaccination campaigns is steering a bullish narrative for the USD, while other global economies grapple with their own set of challenges. The coming weeks, punctuated by significant economic releases and policy decisions, promise further clarity on global economic trajectories.
