Weekly Market Update 15 Jan 2021 – Joe Biden unveils stimulus plan, long lockdown ahead for Germany
Weekly Market Update 15 Jan 2021 – Joe Biden unveils stimulus plan, long lockdown ahead for Germany
1. US incoming President Joe Biden’s new stimulus proposal shows that his focus will be on supporting small and medium sized businesses that were particularly hit by the economic fallout from shutdowns due to COVID, with significant funds being provided for that sector. US consumer demand remains in question particularly for the lower income groups with limited unemployment benefits and the ongoing COVID situation. Even with the stimulus package, relief will likely take several months to be put in place
2. Despite German Chancellor Merkel’s warning of a lockdown that might last for 8 to 10 weeks if COVID numbers do not improve further, EUR remained resilient. The German government warned that there could be no travel until late May. Should the lockdown persist to April, this will cause another technical recession. However, with virus optimism, low interest rates, rally in stocks and low demand for USD, it appears unlikely that EURUSD will break down soon
3. Bank of England Governor Bailey expressed scepticism on the use of negative interest rates and commented that the idea was ‘controversial’. He also brought down expectations by mentioning that its too soon to talk about the need for further stimulus, causing Sterling to soar with the less dovish comments