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15.01.2021 12:03 PM
Will Biden's plan help the US dollar?

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The expectation of the decision of the US President-elect Joe Biden on the adoption of a new package of stimulus measures is marked this week. Experts believe that this will help both the US economy and the national currency to recover in the long term. However, the US dollar is feared to decline in the short-term planning range.

On the morning of January 15, the US currency has slightly lost position against other currencies. According to analysts, it is declining amid concerns about the prospects for the US economy, which is in the form of a new stimulus package.

In this case, the EUR/USD pair declined to the level of 1.2147 today, namely below the level of the previous closing at 1.2156. Experts say that a serious threat to the bulls of the EUR/USD pair is breaking through the limit of 1.2000, which is already very close.

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Markets' attention are still focused on the so-called "ambitious plan" to save the United States, which amounts to $ 1.9 trillion as per Biden's administration. The new bill includes $ 400 billion to combat the spread of COVID-19, while the other $ 440 billion is to help regional authorities and enterprises. In turn, over $1 trillion will be given as payments to the American citizens. Economists estimate that this package is twice the December stimulus. In fact, this is only the first of two major aid packages from the Joe Biden administration. The second economic stimulus project is expected in February this year.

The speech of the Fed Chairman, Jerome Powell, is another important, although slightly unnoticeable event yesterday. However, the markets were not surprised when he emphasized that the current state of the US economy is disappointing, so a soft monetary policy remains a priority. According to J. Powell, fundamental changes in monetary policy (MP) are not yet needed. In this regard, the Fed representatives stressed that the issue of reducing the asset repurchase program is irrelevant. They spoke out against reducing the volume of asset purchases, stating the need to achieve the target inflation rate of 2%. Analysts believe that the Fed's current position pushed the dollar to further below.

Currently, the US currency is under pressure from multi-directional factors. One of the threats to its decline is the adoption of the current stimulus plan for $ 1.9 trillion. According to experts, a non-stop injection of funds into the US economy can provoke another turn in inflation, depriving the USD of attractiveness for investors.

The adoption of a larger stimulus package worth $ 2 trillion is another potential factor that can affect the national currency. It can be recalled that the elected head of the White House announced the implementation of this plan next month. Joe Biden's new project provides funds for creating new jobs and further economic recovery, as well as covers infrastructure projects and fights negative climate change. As for the current financial injections into the US economy, they can further weaken the dollar's position. Analysts are worried that the US dollar will further decline, which in this case, will also need a rescue plan.

Larisa Kolesnikova,
Analytical expert of InstaForex
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