Tuesday, March 2, 2021

Dollar Appreciated Amid Uncertainty Regarding The Stimulus Plan

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The EUR/USD rate rose by 0.02 percent on Monday, January 25, and the trading session ended at the 1.2169 marks. In turn, the dollar index DXY gained 0.17 percent to 90.39.

There is a declining appetite for riskier currencies in the currency markets despite disputes between US lawmakers over the implementation of a proposed $1.9 trillion stimulus package unveiled by President Joe Biden earlier. So, the White House started talks on this topic last Sunday with a bipartisan group of senators. Around the same time, some Republicans have already started to voice concerns about the need for more economic injections. The lack of consensus among legislators may contribute to a pause in negotiating the bill, which in some respects has diminished investors’ risk appetite.

Moreover, the number of cases of coronavirus worldwide continues to increase, impacting investor perception as well. Extreme stringent policies are still in effect in many European countries, and the population vaccination rate is still considerably smaller than projected at the end of 2020, which will definitely impact the speed of global economic growth.

A Fed conference, planned for Wednesday, January 27, will be the focus of this week’s attention. According to its findings, it is predicted that the key interest rate will stay at the level of 0.25 percent and other monetary policy parameters that should help the country’s economic development. At the same time, several economists expect that US economic performance will decrease in the first quarter, followed by a rebound in the spring-summer of 2021, when the population’s vaccine effects will become more evident.

The start of the Davos World Economic Summit, which will run until Friday of this week, is also worth noting.

In terms of macroeconomic figures, yesterday, the US published the Federal Reserve Bank of Dallas’ index of manufacturing market activity, which decreased by 3.5 points to 7.0 points in January, while observers predicted a more extreme decline to 4.5 points.

The Federal Reserve Bank of Chicago’s national activity index in December recorded a 0.52-point score, which is higher than the previous November value of 0.31 points.

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