The US dollar is likely to close the current month with a rise. The greenback is actively recouping its previous losses, trading at its highs against major currencies.
On Tuesday, March 30, the US dollar reached its one-year high against the Japanese yen and a 5-month high against the euro, its main counterpart. Analysts explain this jump by a rally of the US Treasury bonds yield as well as stronger inflation expectations. At the beginning of the day, the euro/dollar pair was hovering near the range of 1.1743-11744. The pair lost its positions, but it tries to return to its previous levels.
Some experts suppose that the US dollar is among the winners due to a rise in the US Treasury bonds yield and a weakening euro. The euro is under pressure from the uncertainties over the European economic perspectives. At the same time, a wider spread between the US and Germany's bonds yields intensifies the already existing pressure on the single currency. Importantly, the difference between the US and Germany's bonds yields jumped to 200 basis points from 150 basis points. This, in turn, led to the US appreciation and a decline in the euro.
At the moment, the single currency is trading near its 4.5-month low, but it is not the limit. Economists suppose that in the next few days, the euro may slump to its lowest levels last seen in the middle of 2019. This will surely boost the US dollar. However, the plan developed by Joe Biden may cap the US dollar rally. Thus, according to the plan, the US government will pour $3 trillion in the local economy. Notably, recently the US economy has received $1.9 trillion.
Nevertheless, the US dollar still has all the reasons for a future rise. Joe Biden's administration is going to add $3 trillion to the $1.9 trillion stimulus package in order to invest in infrastructure and focus on the greening of the economy. The main problem is that these ambitious projects will be financed by increasing taxes. If the US president administration adopts this plan, this could significantly affect the US stock market, which has already lost its stability.
At the same time, Biden may increase the federal debt to implement the plan. In this case, paces of money-printing should be high, whereas the Fed's policy should remain loose. Both variants will have a negative impact on the US dollar and may lead to a reversal of the euro/dollar pair.
The current market situation remains uncertain. However, it seems that the bearish sentiment prevails. According to the technical analysis, in the short term, the euro/dollar pair may form a local bottom, whereas not all attempts to rise will be successful. Experts recommend opening sell positions on the greenback as this may help the euro/dollar pair stay afloat.