Dollar Edges Higher; U.S. Growth Profile Looks Impressive

The dollar edged higher in early European trading Tuesday, with traders retaining a largely positive tone on the back of signs of strong U.S. economic growth and an impressive vaccine rollout.

At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was up 0.1% at 92.688.

USD/JPY rose 0.1% at 110.31, GBP/USD was down 0.1% at 1.3885, while the risk-sensitive AUD/USD was down 0.2% at 0.7634 after Australia’s central bank kept its key policy instruments unchanged Tuesday.

“Until Europe gets its fiscal stimulus on the road and more importantly makes inroads on vaccinations (continental Europe has 10% of its population vaccinated, US 29%, UK 45%) it is hard to fight the case against dollar exceptionalism,” said analysts at ING, in a note.

Germany announced plans Monday to have 20% of its population immunized against the novel coronavirus by the beginning of May, but that would still put the European Union’s largest country way behind the U.S. in percentage terms.

Additionally, while the European Union faces recession given the lockdowns associated with the third wave of the Covid-19 virus, the data coming out of the U.S. points to a sharp economic recovery, with the Institute for Supply Management services index surging on Monday, following on from Friday’s stellar jobs report.

U.S. job openings for February are released Tuesday at 10 AM ET (1400 GMT), with analysts tracked by Investing.com expecting a reading of 6.99 million, which would be up from 6.917 million the prior month.

The one part of Europe that is showing some life is the U.K., with England confirming on Monday plans to reopen the likes of hairdressers, gyms and pubs/restaurants to outside seating from next week.

The U.K. saw some healthy revisions to its fourth quarter 2020 GDP growth data late last week, to 1.3% quarter on quarter from 1.0%, said. ING. “This should continue to support GBP on a relative basis, with EUR/GBP remaining pressured near 0.8500.”

Elsewhere, USD/CNY fell 0.2% to 6.5490, after data showed the recovery in China’s services sector picked up speed in March as firms hired more workers and business optimism surged.

The Caixin/Markit services Purchasing Managers’ Index rose to 54.3, the highest since December, from 51.5 in February, well above the 50-mark that separates growth from contraction on a monthly basis.