Both yesterday's inflation reading from the United States and the news of the Johnson & Johnson vaccine halt may have led to short-term weakness in the US currency. The EUR/USD exchange rate came close to 1.2000 again.
The Dollar Index fell to 91.7 points on Wednesday, close to its lowest levels in a month, as Treasury bond yields stabilized well below recent yearly highs and fresh inflation data eased concerns about the Fed's upcoming tapering of its asset purchase program.
Inflation reading above forecasts
The annual U.S. inflation rate rose to 2.6 percent in March, slightly above forecasts for 2.5 percent, mainly due to energy prices. This is the highest level in more than two years. Core inflation, on the other hand, was unchanged from 2020 levels, reassuring investors of concerns about rising consumer prices.
Appetite for the dollar may have also been dampened by news that the CDC and FDA requested a halt to Johnson & Johnson's Covid-19 vaccine. The reason was said to be the development of a rare disorder involving blood clots in six people in the U.S. after the administration of the J&J vaccine. Thus, the market could perceive this as a postponement of the state of full vaccination of Americans, which could mean that monetary policy will remain loose for longer, which also postpones tapering.
Stock market epidemic paradox
This may be a positive development for stock market indices, where investors seem to be dependent on cheap money flowing from the US Federal Reserve. Thus, a paradox may arise. The longer the epidemic lasts and the population is not vaccinated, the longer the bull market in stocks may last thanks to the loose monetary policy pursued by the Fed. In turn, a rapid pace of vaccination could mean a faster tapering, and that, in turn, may no longer be so favorable for the indexes.
On Tuesday, the S&P 500 rose 0.3 percent to close at a record high of 4,142 points, the Nasdaq Composite rose 1.1 percent to 13,996, while the Dow Jones fell 0.2 percent to 33,677. Today, investors on Wall Street are also looking ahead to the start of earnings release season. Goldman Sachs, JPMorgan Chase and Wells Fargo are expected to report before the session opens.
Coinbase exchange's historic debut
However, the event of the day may be the debut of the largest US cryptocurrency exchange Coinbase. Its valuation initially reaches $67 billion, which is the same as the valuation of the world's largest stock exchange operator Intercontinental Exchange. If Coinbase's capitalization increases on its debut day, we will witness a historic event: the market may be better pricing the prospects for tokens and digital currencies than traditional financial assets... Either way, we are witnessing an event that will go down in the history of financial markets.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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