The yields resume an upward trajectory (Daily analysis 30.03.2021)

In the first part of the year, the US currency wipes out some of the weakness from consecutive quarters marked by the recovery from the first wave of pandemic backed by the unlimited liquidity provided to the markets by central banks.

This is made possible by the economic dominance and difference in the progress of vaccination programs. In the case of the EU, one can safely speak of disappointment. At the end of March, a dozen or so percent of the Community's citizens and over 40 percent of the United States residents had received their doses. In Germany or France, restrictions are being prolonged, and in the USA, they are being lifted. This affects the outlook for economies and monetary policy and has implications for the dollar's continued strengthening. Another element is fiscal policy: in the US, Joe Biden will be presenting an infrastructure package tomorrow; in the European Union, dark clouds are again looming over the Reconstruction Fund. The prospect of another spending surge and the economy gaining momentum from easing restrictions also drives the dominant trend throughout the quarter, which is the decline in US Treasury bond prices. It harms emerging market currencies and helps the dollar.

Pound regains its strength

The situation of the euro contrasts not only with that of the dollar but also with that of the pound. For a long time, Great Britain led the way in vaccination, which resulted in a strong appreciation of the British currency. Its brief correction has quickly come to an end, and the pound - especially against the euro and the zloty - should remain strong. The rapid progress of vaccinations will translate not only into an easing of restrictions but also into an improved economic recovery, evidence of which should regularly shine through in published data. However, the risk factor is the relationship with the European Union. One of the reasons for the pound's appreciation in recent days was the preliminary agreement on the general conditions under which British companies from the financial sector will be able to provide their services on the Continent (Memorandum of Understanding). However, this is only the first step to normalize the rules, and tensions arise in other areas: among others, London violates the provisions on Ireland and Northern Ireland, the controversy also concerns the export of vaccines.