04.03.202109:01 Forex Analysis & Reviews: How long will the US dollar strengthen?

Exchange Rates 04.03.2021 analysis

The US dollar is currently strengthening due to the inspiring US labor market data, as well as the anticipation for Fed Chairman, Jerome Powell's speech.

However, experts do not rule out that the comments of the Fed's head, whose speech is scheduled on March 4, may stop the US dollar from rising. Nevertheless, market participants expect the scenario to be optimistic, believing that the regulator has no reason to make significant changes.

On Thursday morning, the EUR/USD pair reached the level of 1.2057, after slightly declining to the level of 1.2052 earlier. At the same time, the USD index, which is the dollar exchange rate against a basket of currencies of six countries – the leading trading partners of the United States – increased by 0.13%, particularly to 91.07 points.

Exchange Rates 04.03.2021 analysis

The main factors supporting the dollar are strong economic data and updated growth in US government bond yields. During the previous week, the yield reached an annual high of 1.6%, but then plunged to 1.4%. Now, the yield on 10-year US Treasuries has surged to 1.48%.

In addition, positive data on the number of jobs in the private sector of the US economy also provided strong support to the national currency, which was riding a wave of optimism. According to Automatic Data Processing (ADP), the number of jobs in the private sector increased by 117 thousand last month. And although it did not meet economists' forecast growth of 177 thousand, such inconsistencies did not hinder the US dollar from rising. This was also supported by the revised upward data on the number of jobs for January. It should be noted that the number of jobs increased by 195 thousand in the first month of 2021, and not by 174 thousand, as previously reported.

On the night of Thursday, an additional portion of macro statistics are expected. The US Department of Labor will publish data on the number of initial applications for unemployment benefits in the country for the week ending February 27. Experts expect a weekly increase of 20 thousand up to 750 thousand applications.

A summary of the Fed's comments from the Beige Book positively affected the US currency. Based on the current information, a number of counties in the US recorded a fair growth in economic activity from January to mid-February 2021. Relative to the Fed's summary, most of the country's enterprises are optimistic about the next 6-12 months. Experts say that this supports the US dollar, which has experienced a strong imbalance recently.

Larisa Kolesnikova,
Analytical expert
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