1st March 2021 - Dollar accelerates slump as optimism mounts

Updated: Mar 1, 2021


Good Morning,


Market Headlines

On Saturday, the US House of Representatives passed President Joe Biden's $1.9 trillion coronavirus relief package by 219-212 votes. Republican support was missing, but the bill moved to the Senate, where is expected to pass before March 14, when the previous round of stimulus expires. Also on Saturday, President Biden called on the Senate to pass the stimulus bill.


Over the weekend, news pointed out that UK finance minister Rishi Sunak would announce this week 5 billion pounds of additional grants to help businesses hit by the pandemic, in his budget statement next Wednesday.


Global indexes closed with sharp losses, except for the Nasdaq that managed to post an intraday advance. US Treasury yields continued to retreat ahead of the weekly close, but that didn’t prevent the dollar from appreciating. The yield on the benchmark 10-year Treasury note settled at 1.40% after peaking at a one-year high of 1.61% mid-week. Commodities, Brent crude oil futures fell 1.1% to $64.40, copper fell 3.9%, iron ore had its own rhythm and rose 1.0% to $176.30 (a 10-year high), and gold fell 2.1%.

AUD Thoughts

A busy day ahead to kick off the week data front. China will release its manufacturing PMI may surprise higher as the travel curbs during Chinese New Year may have led to early resumption of production. To Europe, where Germany’s CPI is expected to rise by 1%. The main event for the day is the February’s ISM Manufacturing PMI from the US solid reading is likely based on the Fed regional surveys which showed improvement in the aggregate relative to January, while the Markit preliminary measure showed a slight deceleration.


The AUD continued its slide into the weekend with bids filled with ease into Friday’s low of 0.7692. Further demand is expected ahead of 0.7650 while offering interest has likely followed spot lower and rests at 0.7750 and again at 0.7820.


Overnight Currency Ranges

AUD/USD 0.76925 0.7883

EUR/USD 1.2140 1.22435

GBP/USD 1.4001 1.4182

USD/JPY 105.84 106.40

NZD/USD 0.7370 0.7463

USD/CAD 1.2468 1.2590

USD/CNH 6.4444 6.4975

AUD/JPY 83.54 84.92

AUD/NZD 1.0680 1.0741


Event Risk Data Today

Australia: The daily measure of the CoreLogic home value index has shown prices skipping ahead over February. Markets expect a very strong 2.0% gain for the month. The February AiG PMI should continue to show that manufacturing is expanding on the reopening and housing upswing. To round out the domestic data, we will receive the February MI inflation gauge and February ANZ job ads.


Asia: Several Nikkei Manufacturing PMIs will be released, including China (Caixin), Japan, India, and Indonesia.


Europe: Markit manufacturing PMIs are due for Germany and the Euro Area.


US: Construction spending is set for further expansion in January, with residential construction the clear outperformer (market f/c: 0.7%). We will get an update on the manufacturing sector in February with the Markit Manufacturing PMI and the ISM manufacturing index (market f/c: 58.8). Several FOMC members will be speaking, including Williams (01:00 AEDT) and Brainard (01:05 AEDT).

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