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Biden to unveil details of long-awaited stimulus plan

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14 January 2021

Written by
Matthew Ryan

Senior Market Analyst at Ebury. Providing expert currency analysis so small and mid-sized businesses can effectively navigate international markets.

The major currencies spent much of trading on Wednesday in a holding pattern as investors await details of President-elect Joe Biden’s long-awaited stimulus plan.

T
he US dollar actually edged modestly higher versus both the euro and sterling yesterday, perhaps triggered by safe-haven flows into the currency following the news of Donald Trump’s impeachment. Trump becomes the first president in US history to be impeached twice during his time in office for the part he played in inciting the violence that unfolded at Capitol Hill last week. Whatever happens, Biden will be sworn in as the 46th president of the United States next week. The first item on the agenda will be forcing through additional fiscal stimulus to protect individuals and businesses from the ongoing pandemic, the details of which will be announced later today. As far as the FX reaction is concerned, the larger the package, the greater the rally in risk currencies.

Macroeconomic data out of the US didn’t really rock the boat yesterday. The latest inflation data came in modestly stronger-than-expected, although still remains well below the Federal Reserve’s target at 1.4% year-on-year. Traders will now focus on Friday’s retail sales and industrial production numbers for December.

Lagarde reiterates ECB to monitor exchange rate closely

President of the ECB Christine Lagarde failed to add much new information on monetary policy during her speech yesterday, although she did again reiterate that the bank was monitoring exchange rate movements very closely. This afternoon’s ECB meeting accounts will be eagerly awaited by the market, although we don’t envisage anything particularly newsworthy to come out of them. The euro has just begun to lose a bit of steam in the last week or so, we think partly a result of the contrasting approaches to handling the pandemic between the US and Euro Area, with the latter enforcing much stricter containment measures that look likely to remain in place for a little while yet.

Meanwhile, sterling continues to largely hold its own, despite the doom and gloom headlines surrounding the pandemic. A record of more than 1,500 COVID-related deaths were recorded yesterday, albeit much of these run on a delay with the actual fatality numbers based on the date that they occur still much lower than the peak in April, despite considerably higher testing. There have also been signs of a plateauing in both cases and hospital admissions in some areas, although it is still too early to begin drawing any conclusions from this.

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