01.04.202110:41 Forex Analysis & Reviews: Markets seem to be on the verge of a new era: strong dollar era

The latest ADP employment data released on Wednesday showed that the US labor market continues to recover. The process is ongoing, although gradually.

The presented ADP data on the number of new jobs in March is noticeably higher compared to the figures for February, although it turned out to be slightly below the expected values. In particular, the number of new jobs in March rose by 517,000 against the forecast of 550,000 and February's upward revised value of 176,000. Despite the fact that the numbers were slightly lower than expected, they still show the strongest growth, which confirms the Fed's forecasts about America's sharp economic recovery in the spring and summer period. Now, all the attention of the market will be focused on the publication of the already official figures from the Ministry of Labor, which will be presented this Friday.

The US dollar reacted to the news with fair growth in the ICE index, which reflects the ratio of the US currency to a basket of major currencies. And despite today's decline, the indicator is still above the key level of 93.00 points.

There is no vague dynamics in the stock markets following the results of Wednesday's trading. Apparently, investors were calmed by the news about J. Biden's intention to pour $ 2.2 trillion into the country's economy to repair the country's infrastructure and to implement large-scale projects in various areas of the economy for a period of 8 years amid a corporate tax increase from 21% to 28% for the first time since the Clinton presidency in the 90s.

However, markets are clearly not happy about the topic of raising taxes. This is because such taxes together with rising inflation and as a result, a change in the Fed's monetary policy, might put pressure on speculative demand for company shares, which continues to be reflected in the dynamics of primarily US stock indices. In turn, the US dollar is likely to become the beneficiary of all of Biden's plans as a result of these events.

The strength of the national currency is supported by investors' continuous withdrawal from Treasuries, which will steadily stimulate the growth of their profitability and make profitable investments in dollar assets. The upcoming changes in monetary policy will also have a positive impact on its exchange rate. It is likely that we are witnessing the beginning of the era of a strong dollar, if the government rate and the Fed's view of the future will coincide.

Forecast of the day:

The EUR/USD pair is consolidating while waiting for the release of official US employment data. The pair is likely to remain in the range of 1.1700-1.1760 today. But if tomorrow's values of the number of new jobs are higher than expected, this could stimulate the pair to break through the range and rapidly fall to 1.1650.

The USD/JPY pair is consolidating ahead of the release of US employment data tomorrow. If the number of new jobs show strong growth, then the pair will most likely leave the range of 110.45-111.00 and rise to 111.70.