By the end of the first quarter, the US dollar has noticeably gained in weight. March was a particularly successful month for the greenback, growing almost 3%.

On Wednesday, the USD reached multi-month highs against its major rivals, including the euro.

The success of the United States on COVID-19 vaccinations and the prospect of a strong national economic recovery in the second quarter/half of the year make the dollar more attractive.

Earlier this week, US President Joe Biden said vaccinations of most adults in the country could start in three weeks. Also, the number of new cases of coronavirus infections in the US in March decreased markedly compared with February and January.

"We may see a surge in activity and better results as summer approaches, which could lead us to an even stronger recovery. One million jobs a month will become the standard for the summer," said Raphael Bostic, President of the Federal Reserve Bank of Atlanta.

The data released the day before showed that consumer confidence in the United States soared to its highest level since the start of the pandemic this month, supporting the view that economic growth in the country will accelerate in the coming months.

"The adoption of a $1.9 trillion bailout program for the US economy earlier this month undoubtedly boosted consumer confidence. Yesterday's data reflected an increase in the indicator to the highest levels since the beginning of the pandemic (from 90.4 to 109.7 points). At the same time, the index of current conditions, which is considered an indicator of the labor market, has demonstrated the maximum growth since April 1974," MUFG Bank specialists noted.

"All of this paints a positive picture for the USD and, given the dynamics of the exchange rate, positioning, and technical characteristics, indicates further strengthening of the dollar soon," they added.

Although the greenback has corrected slightly after reaching nearly five-month highs (around 93.45 points), it is still close to posting its highest monthly gain since November 2016.

On Wednesday, US President Joe Biden will present a plan for measures to support the national economy.

The $2.25 trillion plan is for eight years and may include tax hikes.

At the same time, it is not yet clear whether Joe Biden will strive for one large package or postpone part of the costs and tax increases for the second phase.

It is also worth noting that this is only a plan and still needs to be approved in Congress. And there are already opponents of these changes.

Just a hint from Joe Biden of a tax hike will be enough to trigger profit-taking in the American stock market, which is already trading near record highs. As a result, stocks will suffer and the greenback will continue to rise.

However, even if the increase in corporate taxes is postponed until the second stage of the plan, the yield on US Treasury bonds may rise even more, including amid fears of accelerating inflation in the country. Again, this will play into the hands of the dollar.

The short-term risk for the greenback is the traditional end-of-month and quarter-end cash flows. With the US stock market hitting all-time highs in March and the USD index hitting a nearly five-month high, investment managers will likely have to sell dollars to balance their portfolios. However, positions are adjusted mainly during the week, and not on the last day of the reporting period. At the same time, these flows are, as a rule, temporary in nature.

In addition, monthly data on the US labor market will be released in the coming days. If they slightly disappoint market participants, the dollar will go up again.

Meanwhile, the EUR/USD pair has already completely won back the growth shown in November last year and in the first days of January this year.

Low rates of vaccination and tightening of quarantine in the eurozone are undermining demand for the euro, which has not been helped by either improved business sentiment or increased price pressures in the region.

Investors understand that in the light of the extension of the quarantine, the statistics will worsen, therefore they do not attach much importance to the current indicators of the European economy. That is, whatever the temptation to buy the main currency pair at the lows, the time has not come yet.

French President Emmanuel Macron is set to announce new measures to contain the surge in COVID-19 cases that threatens to overwhelm local hospitals. German authorities have banned the use of the AstraZeneca coronavirus vaccine for people under 60 after new cases of thrombosis have been identified.

As Europe continues to fight to vaccinate its citizens, the US is making headway in this regard.

The widening gap between Europe and the US on economic recovery is also weighing on the euro.

On Wednesday, the single currency marked a five-month low near $1.1700 and then managed to recover somewhat, taking advantage of the fact that the greenback paused growth.

However, the recent rebound in EUR/USD may be just one of the pullbacks ahead of the continuation of the downward trend.

The fall continues to be the path of least resistance for the major currency pair. Any attempt to recover it is likely to be viewed as a favorable selling opportunity and will be capped at 1.1760.

Below 1.1700, the pair could target 1.1630 and 1.1600. The breakout of the last mark will strengthen the bearish sentiment.