EUR/USD: Bears Take Advantage Of Biden’s Benevolence, Vaccine News Eyed

Ready to negotiate – President Joe Biden’s willingness to discuss his $1.9 trillion stimulus bill with Republicans – and lower the final package scope – is worrying investors. Stocks are on the back foot and the safe-haven dollar is gaining ground across the board.

Specifically, the president said he is willing to lower the income threshold for the $1,400 government check, and another point of contention is the raise of the minimum wage to $15. While settling on somewhere between $1.1 to $1.5 trillion was probably priced by markets, any delay is causing jitters in markets.

The Senate approved Janet Yellen’s nomination as Treasury Secretary and her initial deliberations with moderate Democrats and Republicans will be key to understanding where the wind blows. The White House may also decide to go it alone – passing the full package even without broad support.

For markets, the calculation is simple – the sooner and the bigger, the better. In such a scenario, the dollar would fall, while protracted talks would boost the greenback.

EUR/USD has been on the back foot also due to European political developments. Italy’s Prime Minister Giuseppe Conte is set to resign on Tuesday, in what may prove only a “tactical move” before forming a new government. However, political instability during the crisis is never a positive development. Both France and Germany are considering tightening restrictions as covid cases and deaths remain elevated in the old continent.

European leaders are also growingly frustrated about delays to vaccine supplies from both Pfizer and AstraZeneca. The continent is lagging behind the UK and the US and far behind Israel, the world leader – which is beginning to see promising results from its immunization scheme. Over 80% of people aged 60 or higher have received at least one dose, and their share of hospitalizations has dropped sharply.

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