have gotten used to Bitcoin, the first digital currency, reaching new highs
over recent months. So, the fact that Bitcoin
reached a new fresh record at $64,374 on April 14 may not seem so sensational
any more, even with a heartbreaking upside movement by 5.5% in a single day on
This may be
another reason why the perception around
digital currencies seems to be changing.
Treasury Secretary of the United States Janet Yellen called governments around
the world to set up a minimum corporate tax rate at 21%. The idea was swiftly
supported by the International Monetary Fund (IMF). The U.S. believes that this
unified tax rate will act as a general wheel for the global economy.
according to Yellen this minimum tax rate should prevent cross-border capital
flight, domiciliation by corporates to low-tax jurisdictions.
Dollar index (DXY) gained another high at 93.2 points, a maximum not seen since
November 2020. The rally of the Greenback may have several reasons to continue,
but it may be suspended after the release of the NonFarm Payrolls report this
accelerating vaccination in the United States and expectations about a new $3
trillion stimulus bill promised by Joe Biden may support the optimism over
rising business activity in the country, as well as inflation expectations, which
may push up Treasuries yields. The 10-year Treasuries yield jumped to 14-month
highs at 1.
The U.S. Federal Reserve (Fed) has jumped into the digital currencies race to create its own CBDC (Central Bank Digital Currency). “We have an obligation to be on the cutting edge of understanding the technological challenges, as well as the potential costs and benefits, of issuing a [central bank digital currency]," Fed Chair Jerome Powell said.
However, Mr. Powell said that there is no need to rush with the launch of a new currency: “we’re the world’s principal reserve currency, we don't need to rush this project, and we don't need to be first to market.
The U.S. Dollar has overturned the consensus idea of the weakening Greenback that seemed to capture investors’ minds in the financial market. Negative factors that pressured the American currency before suddenly turned to a positive upside are discussed below.
The loose monetary policy of the Federal Reserve (Fed) and a new fiscal stimulus package of $1.9 trillion should, in theory, increase the supply of Dollars and this should eventually lead to a weaker Greenback. It is expected that neither the Fed nor the U.S.
Crude prices are highly dependent on risk appetite and business activity expectations. Such expectations may be an explanation of the rally in crude prices, stock indices and other risky assets in the recent weeks. However, crude prices rally is rather more emotional and was not supported by strong fundamentals.
In February, OPEC estimated daily crude demand up by 5.6 million barrels per day in 2021 after it tumbled by roughly 10 million bpd in 2020. Meanwhile crude prices are already at those levels of early 2020 demand with Brent crude at $63-65 per barrel.
Traditionally one of the major indicators for how the U.S. Dollar may move is the movement in U.S. Treasuries, but the connection between the two has been seen to weaken lately.
Such a correlation between the two is evident as Treasuries are a “Gold standard” for safe haven bonds with an ultimate security level. Any investments in Treasuries could be compared with having cash in your hands. So, any rise of Treasuries’ yields that enable for the creation of additional profits without any seeming risks could ignite additional demand for the Greenback and that could lead to its strengthening.
Yesterday Bitcoin, a leading digital currency, posted a new all-time high above $48,000 a coin. It may seem remarkable that 25% of the gains were accumulated over the period of two days from $38,000, and after famous business magnate Elon Musk claimed that Tesla has invested $1.5 billion in Bitcoin.
Such news in itself could spark investors’ attention to the asset. But this could be seen as an expandable reason.
The oil market seems to be awakening to a cloudy beginning of February and, as a result, it cannot see its shadow. Just like a groundhog, who knows that such a circumstance signals an early spring, the oil market may also assume a turnaround is on its way. Such an analogy may seem fitting as Brent crude benchmark prices topped $57.7 per barrel on February 2, which was exactly the same level that was recorded on the same day last year. A true celebration of another Groundhog Day with hopes of an early economic recovery.
The single European currency seems to attract most of the investors’ attention as its share grows in both international settlements and forex reserves. The pair manifests Hegel’s philosophy of law: unity and struggle of opposites. Both components of the currency pair represent two major world economies with risk aversion that sometimes can mimic the relationship of friends and antagonists at the same time.
Market sentiment recently suggested that the Euro could rise significantly in 2021, and there is a strong background behind this expectation.