As we near the end of the week, there are few indications that what we see as a corrective dollar bounce has reached its conclusion. This week’s agenda includes a few inputs that, on paper, seem to be dollar positive. The first is the US macro data, which is expected to be strong in March. James Knightley expects a 750k increase in nonfarm payrolls, compared to a 600k increase in the consensus. From 6.2%, the unemployment rate is forecast to drop to 5.9/6.0%. None of this, however, could sway the Fed, which is still waiting for 10 million people to find jobs and has gone to great lengths to discredit the unemployment rate as a catch-all statistic for the unemployed.
The announcement of Joe Biden’s $3 trillion infrastructure plan would be the second major factor. This, according to James Knightley, would be more difficult to sell than the $1.9 trillion stimuli. It will also be fascinating to see how the market responds to any talk of tax increases for corporations and the rich, as well as a possible increase in the Capital Gains Tax. We’re still betting on a bearish dollar later this year, but we’ll have to wait for bond markets to calm down and Europe to start contributing to the global recovery before the dollar begins to soften again.