US 10-year yields were close to 14-month highs which stifled confidence.

Risk appetite remained slightly more fragile during Tuesday. US 10-year yields were close to 14-month highs which stifled confidence. Wall Street equities lost ground with Asian markets also losing some ground.

The dollar maintained a notably strong tone and posted fresh 4-month highs EUR/USD also dipped to fresh 4-month lows close to 1.1700. Sterling was unable to sustain moves higher with economic recovery priced in. Commodity currencies were undermined by the strong dollar, but strong Chinese data provided some relief.

The Euro-zone industrial sentiment index strengthened to 2.0 for March from -3.1 previously and well above market expectations of -5.0. There was also a recovery in the services sector to -9.3 from -17.0. German consumer prices increased 0.5% for March, in line with consensus forecasts with the year-on-year rate increasing to 1.7% from 1.3% which was also in line with market expectations. The Euro-zone CPI inflation data will be released on Wednesday with expectations that the year-on-year rate will increase to 1.4% from 0.9% with the core rate unchanged at 1.1%. There are strong expectations that the ECB will look through any short-term increase in inflation.

The Euro remained under pressure during the day amid a lack of confidence in the Euro-zone outlook and adverse yield spreads. There were further concerns over vaccine developments with another round of negative reports surrounding the AstraZeneca vaccine.

The dollar maintained a strong overall tone during the day with a renewed retreat for commodity currencies. There were some reservations over US coronavirus developments following a strong warning from a senior member of the Center for Disease Control (CDC) over the current increase in cases.

The Case-Shiller house-price index recorded an annual increase for house prices of 11.1% for February from 10.2% previously and the highest reading since mid-2014.

Consumer confidence increased sharply to a 12-month high of 109.7 for March from 90.4 previously and well above consensus forecasts of 96.9. Consumers were also more optimistic over the labour-market outlook. Richmond Fed President Barkin stated that the economy would be driven strongly by excess savings.

The dollar overall posted fresh 4-month highs and EUR/USD weakened to near 1.1710. The dollar maintained a robust tone on Wednesday with EUR/USD at fresh 4- month lows just above the 1.1700 level.

Month-end trading is liable to lead to volatility later in the session with markets also monitoring US labour-market developments.

US yields continued to move higher in early Europe on Tuesday and the dollar posted further gains, especially after USD/JPY moved above 110.00 for the first time in over 12 months. In this environment, USD/JPY advanced to highs around 110.40 and held firm in early US trading despite a slight retreat in bond yields.

President Biden will formally launch his infrastructure plans just after the New York close on Wednesday with expectations of spending around $4.0trn over the next 10 years. He is also expected to announce tax increases, including an increase in corporate taxes. The Wall Street reaction will be watched very closely.

US equities remained in negative territory with USD/JPY settling around 110.30 late in the New York session.

The Chinese PMI manufacturing index strengthened to 51.9 for March from 50.6 previously and above consensus forecasts while the non-manufacturing index posted a strong gain to 56.3 from 51.4 which helped underpin Asian growth expectations.

The yen weakened sharply, especially with expectations of month-end selling, with USD/JPY posting fresh 12-month highs close to 111.00 before a slight correction with EUR/JPY around 129.80.

Sterling was unable to make headway in early Europe on Tuesday as global trends tended to dominate. Support for the UK currency was undermined by a fresh retreat in commodity currencies during the day as the US dollar continued to dominate markets.

The UK currency was still able to gain some support from optimism that the UK vaccine programme would allow a steady easing of restrictions and strong recovery. UK yields also moved higher after the European open. Nevertheless, there was a slightly more cautious stance given global trends. The UK currency was also unsettled by fresh doubts over the AstraZeneca vaccine after another German study pointed to increased risks of blood clotting.

GBP/USD dipped to lows near 1.3700 against the firm dollar while GBP/EUR settled around 1.1730. Expectations of a global recovery provided an element of Sterling support with GBP/USD held around 1.3720 against the strong dollar on Wednesday.

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