FX flows waiting for spending package

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FX flows waiting for spending package

FEBRUARY 12, 2021

A quiet week of FX flows is coming to a close as the buck is trying to squeeze out a half percent gain in the midst of rescue package negotiations and advancement at least in the inoculation efforts on a daily basis. 

Overview

If we continue at this current pace of 1.62 million vaccinations/per day, we could have everyone safe in nine-months’ time. This is a tremendous improvement from reports last week that experts foresaw the pace leading to herd immunity in seven years.

Although the U.S. Congress has a blueprint for spending, they are still ironing out the details of the amount for individual checks and if parents can receive cash instead of tax credits. Data has been pointing at a very slow recover as well as, particular damages to the labor sector, but tackling the medical issue at hand could change the outlook and get FX moving again.

An issue worldwide is the flare up of new variants to the virus, which is extending lockdown measures and reviving travel restrictions. As a result, the global stock rally is stalled and even energy costs are starting to dwindle after a January where the thought was prices would continue to improve as demand would grow. Overall, world stocks still climbed 1.1% this week. With central bankers such as Jerome Powell just waiting for fiscal help, no real momentum will be consistent until there is something passed.


What to Watch Today…

  • No major events scheduled for today

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TEMPUS IN REUTERS – DOLLAR FEELING THE HEAT
US Dollar Index Chart
“The reflation trade that boosted equities and caused the 30-year yield breach 2% has changed to worries that a quick spike in inflation would be detrimental to risk and also the dollar,” said John Doyle, vice president of dealing and trading, at Tempus Inc. in Washington.

EUR  

The Euro managed to rise by 1.1% this week as the outlook for vaccine distribution is improving with the admission of mistakes from the highest EU authorities. Making up will be difficult, but the Europeans understand the importance of a more rapid response and have approved the necessary parties to start getting people vaccinated as originally planned. Additionally, this week the EU realized its economic well-being may not take as long to recover as previously thought with growth levels expected to reach pre-COVID numbers by Q1 2022. We will see how Italy forms a government and what can be expected from Germany as it tries to regain control of the pandemic.

GBP  

Pound was a big mover this week, increasing its value by 1.8% as it continues to vaccinate its population. Although post-Brexit trade has brought its issues, the Sterling is enjoying a round of positivity especially as traders see the Bank of England as helpful to the economy and careful about implementing new policies, such as the potential for negative interest rates, without causing panic.

Furthermore, Q4 Gross Domestic Product figures revealed that the economy grew more than expected at 1.0% over the 0.5% estimate. Perhaps Britain has room for improvement as does its currency, but we put some doubt on this strengthening as it is not beneficial for competing trade-wise.

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