EUR/USD has been retreating in response to reports of a $2 trillion stimulus package from Biden’s administration and Fed Chair Powell’s comments on the bank’s bond-buying scheme may send the pair over the edge, Yohay Elam, an Analyst at FXStreet, reports.
“More government money is better for the dollar – at least when it comes to fiscal stimulus. Media reports that President-elect Joe Biden is set to announce a generous stimulus package worth some $2 trillion has boosted markets and the dollar. Investors had speculated that the scope of the relief would hover around $1.3 trillion.”
“Several officials at the Fed have been rejecting the option of an early reduction in debt purchases – but the mere discussion about scaling the program down rather than expanding it has been supporting the dollar.”
“Jerome Powell, Chairman of the Federal Reserve, has the final word – and he speaks on Thursday, ahead of Biden. The world’s most powerful central banker does not need to address the Fed’s $120 billion/month scheme – only comment about the future. If he is optimistic, the dollar could rise, and if he is cautious, it could fall.”
“Coronavirus continues raging in the US. The daily death toll refuses to drop below 4,000 and hospitals are under pressure. The situation in Europe is even worse, with Germany recording a new mortality peak as it mulls extending its lockdown.”
“Lagarde said that uncertainty is lower after Brexit, the US elections, and the vaccines. Her words failed to help the euro – and it is hard to see how the ECB minutes can boost it.”