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Dollar is dying?The two parties in the U.S. may push a $900 billion stimulus package
It is reported in the market that the two parties in the United States will announce an economic stimulus package of up to 908 billion US dollars, which is expected to break the deadlock that has lasted for several months.
The news increased market risk appetite, and the US dollar index plunged 0.93% on Tuesday, hitting a new 2-year and 8-month low. It further fell to around 91.13 on Wednesday.
In order to break the deadlock in negotiations over the past few months, Democratic and Republican lawmakers proposed a $908 billion stimulus plan on Tuesday, which will provide emergency assistance by March 31 next year, including an additional $228 billion for hotels, restaurants and small businesses. Payroll Protection Program (PPP) funding. However, Mitch McConnell, the leader of the Senate Majority Party (Republican), immediately expressed his opposition.
In addition, Speaker of the House of Representatives Nancy Pelosi revealed that he and US Treasury Secretary Steven Mnuchin are discussing the resumption of the stimulus plan. Pelosi said that Mnuchin will evaluate the cross-party proposal and the rescue plan proposed by her and the Democratic leader Chuck Schumer.
After the election, the U.S. dollar fell flat
Since the US general election, the risk appetite of almost all investment products has increased, and the dollar has been weakening, reflecting the market's optimism about the economic outlook. ING believes that even if the U.S. dollar rebounds in the short term, it is only a flash in the pan. A strong stock market will only put pressure on the U.S. dollar, and the new round of economic stimulus package will only make the U.S. dollar fall further.
The global PMI report shows signs of inflationary pressures to increase inflation expectations. Among them, the 10-year inflation breakeven point in the United States increased to over 1.8% on December 1, which means that the market expects the average inflation rate in the next 10 years to reach 1.8% is the highest level since May 2019.
The attractiveness of the dollar as a safe-haven asset has been greatly lost. In the past month, the U.S. dollar index continued to hit its lowest level since April 2018. Under risk appetite, the euro against the dollar is close to a three-month high, and the New Zealand dollar against the dollar also rose to a new high in more than two years.
TD Securities Research is optimistic about the technical support of the euro against the Australian dollar and is expected to accelerate the rise. It is recommended to do more euro against the Australian dollar this week, with a target price of 1.6675 and a stop loss at 1.5890.
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