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02.03.2021: USD picking up steam (DJIA, USDX, USD/CAD)

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Futures on the US stock indices are losing ground following a surge yesterday. The US dollar is extending strength against six major currencies, including the Canadian dollar.
The Dow Jones slipped 0.09%. The Nasdaq fell 0.18%. The S&P 500 is 0.14% down.
Judging by the dynamics of the US stocks in the American pre-market, the equity market is expected to make a correctional decline today. Yesterday, all benchmark stock indices jumped by about 2-3% as investors welcomed the news that the US House of Representatives had approved the long-awaited relief package worth 1.9 trillion dollars.
Experts point out that the US stock market lacks stability today. On the one hand, investors are encouraged by improvement in the economic conditions amid a large-scale vaccination campaign. On the other hand, market participants worry that central banks could tighten monetary policies earlier than expected. If such predictions come true, no more cash will be injected into markets.
Nowadays the US economy greatly depends on ultra-loose monetary policy. So, the economy still needs further accommodation from the central bank to ensure a steady recovery.
Today the US dollar is extending a winning streak amid overall investors’ optimism about progress on passing the stimulus bill and in light of an upbeat manufacturing PMI from the Institute of Supply Management released yesterday.
So, the US dollar rose 0.11% against a basket of six major currencies to 91.144, the highest mark in three weeks.
The greenback is also holding the upper hand versus its Canadian counterpart. The USD/CAD pair inched up 0.03% to trade at near 1.2659.
Lately, the currency market is getting more dependent on the global bond market. Despite the fact that US Treasury yields eased, the US dollar advanced amid expectations that the Federal Reserve would not be concerned about a sharp increase in Treasury yields unlike other global central banks. Indeed, Fed Chairman Jerome Powell stated that the regulator would monitor any surge in inflation. Besides, he said that monetary policy would hardly be tightened ahead of schedule. Moreover, Federal Reserve Bank of Richmond President Thomas Barkin added that the US central bank did not fear the recent sharp climb in Treasury yields. The European regulator sticks to the opposite stance. ECB leaders voiced concern over unexpectedly rapid growth of government bond yields. So, the ECB is going to take measures against a premature rise in borrowing costs for companies and households.

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