A pause in the greenback’s advance (Daily analysis 10.03.2021)

The risk route took a breather on Tuesday with the dollar declining, bonds yields easing back and emerging market currencies rallying. The US tech stocks bounced around 4 pct while blue chips traded flat.

The EUR/USD currency pair edged higher from the crucial 1.1850 area. Some long term market participants may perceive current levels as an attractive entry point. The euro no longer feels the burden of a stretched positioning. Consequently, the main currency pair should be close to bottoming out. No significant move higher in the long term upward trend should occur in the coming days, however, due to the rosy picture of the US economy and relative progress of the vaccination programmes.

At the same time, it is definitely too early to call an end to recent turbulences, especially for the emerging markets space. Strong inflation numbers may very well trigger a sharp rise in inflation numbers, the outcome of the US treasury debt auction, or even passing the 1.9trn USD relief package in the House of Representatives, which would allow for the bill to be signed by Joe Biden before the expiration of the unemployment aid programmes on Sunday.

In the G-10, the Scandies continue to perform well. The EUR/NOK pair declined below the 10.10 handle, and the pair trades at the lowest levels since the outbreak of the COVID-19 epidemic. In the emerging markets space, the zloty, the koruna and the forint bounce from the recent weakness, yet the pack is led higher by the South African rand or the Russian ruble.