Yes, there will be more tapering; no, the dollar won't rise

March kick starts with US stocks at record highs and the EUR/USD soaring above 1.3900, anticipating a more interesting month for traders after a quite sad February. But for the most, we have learned over these last few days that market is not concerned.

It’s not concerned about Russian/Ukraine crisis, as the risk rallies lasted less than 24 hours; is not concerned tapering will reduce the liquidity around the world, as stocks don’t know more than rising; and finally, is not concerned about the economic future of major economies:  In Europe, up ticking inflation and positive PMI readings gave the ECB the chance to remain on hold, taking off the table negative rates, I believe for good. In the US, the 175K jobs gain in February reassures that the labor market continues to improve, good enough also to guarantee the FED will continue cutting off $10B per month. 

So overall seems forced are imbalanced, and economies are on the recovery path, some doing better than others, but none doing outstandingly better than its neighbors. So why is that the dollar seems to have no chance? 

Mostly because market has already digested and priced in the upcoming cut in US facilities, and is now basing its demand of riskier assets in confidence on the economic future rather than in an excess of greenbacks flooding the world. However, this does not mean the dollar is on a one way down, particularly against its European rivals, it’s just what the market thinks these days. And is does not matter actually if its right or wrong, it’s just a fact. 

Anyway, the upcoming week won’t lack entertainment either, bringing interesting data, with Asia in the spotlight: Chinese numbers will be the top releases of the week, affecting mostly commodity currencies such as AUD or NZD: better than expected readings should boost the rallies in such currencies against the greenback, while affecting less EUR and GBP, but supporting them as per triggering dollar weakness.

Japan will also offer first line data, with the BOJ meeting included, albeit after latest movement, the most likely scenario is that the Central Bank will stay on hold this month, giving the JPY some short term support. 

Europe won’t offer any first line data to take care of, but positive numbers will likely give the EUR a push, while negative ones will see buyers surging on dips, as sellers will likely stay off the hook. Finally in the US, Retail Sales and PPI over the end of the week will provide some action, albeit does not seem likely such news will be enough to take the greenback away of its bearish trend.