Barack Obama’s stimulus Package was approved by both Congress and Senate. It narrowed down from $825 billion to 787$, but it’s still huge. Now that the final offer was approved, it’s time to look into it, and see how it will affect the dollar.
On January 26th, I wrote that the stimulus package contains spilling lots of dollars into the economy, something that will weaken the dollar. Well, it sure does.
The stimulus package, that was hardly approved, focuses on creating jobs: 800K in 2009, and 2.3 million up to the end of 2010. More jobs naturally mean more spending.
But there are also direct actions that spill money, or print it if you wish. 400 dollar tax cuts for workers, and a 250 check for old age pensioners. All this money, combined with investments in infrastructure mean lots of money into the economy.
And where will this money come from? Well, America will continue to borrow it’s way out of the crisis, practically print dollars. And too many dollars mean that it’s worth less…
In the previous post about this issue, I mentioned that the price of gold climbed above the $900 mark. Well, it now trades at $940. So, it already made a climb of 4.5% in three weeks. Gold is a solid safe haven when money becomes worthless.
And which currency will benefit most from gold? Well, the Australian dollar. crnow stands at 0.6548. It didn’t make wild moves in the last three weeks. It will be interesting to see if the Australian dollar jumps after trading resumes. I’ll write a technical analysis of the Australian dollar later on.
So, even though Obama’s plan brings high hopes for the revival of the American economy, the dollar will be hurt from it.
If you’re more into technical analysis than fundamental analysis such as this, it’s better to first practice with a forex demo account.