Global spending hopes undoing dollar gains

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Global spending hopes undoing dollar gains

The U.S. Dollar is trading in weaker ranges this morning following the Inauguration yesterday, which cemented the end of speculation over a new administration and sets the wheels going for the fiscal stimulus and COVID-19 management the markets are eager to see. 

Overview

Asian and European sessions saw mostly Green territory with Hong Kong Hang Seng being the only exception but only because it is cooling off after reaching its highest points since mid-2019. As Biden and his agenda make their way, it helps in the development of the global recovery narrative that many are referring to as a “reflation,” when affected sectors will all climb in unison as growth flourishes consistently. There is much tied to the prospects of heavy spending and for now it is certainly depreciating the buck.

Data also came in earlier showing positive momentum in Housing Starts and Building Permits for December, particularly the former advancing by over 5.8% when only 0.8%. Continuing claims for the week wee lower than expected, though still near 1MM and the Philadelphia Fed Business Outlook showed far more results as expansion is expected among business owners. We will keep an eye on any new executive orders and possible calls for stimulus action that can shake markets, but for now the thought of a better 2021 is negatively impacting the greenback.


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EUR  

The Euro improved as the European Central Bank maintained its policy unchanged and will continue with QE to aid the financial environment as the continent climbs out of their shutdown economyAt the time of writing, ECB President Christine Lagarde kept talking to the press, primarily laying out that there are many positives for economic progress, but they are all limited by COVID. As she reiterates her points, Euro keeps looking to go back to its December levels. Expect Euro strengthening next few weeks if infections go down and vaccine rollouts keep going.

GBP  

Sterling continues its rise as traders give credit to the country’s efforts in vaccinating people and the Bank of England is noticing. BOE Governor Andrew Bailey said that in these times of economic limits, people are adapting and that while not much official data is in for what has occurred in January, there could be surprising levels of improvement.

Gross Domestic Product numbers may not be released until February 10th, but the central bank is hoping there is enough juice going that they do not have to ease any further. All across the world, the focus will be on spending ad how governments prepare themselves fiscally to get rid of an era of austerity. This bodes poorly for the buck right now.

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