Joe Biden and US dollar. Table of Contents
Joe Biden and US dollar
The US dollar was weak throughout the major part of the last year.
Will this trend change now, when Joe Biden has become the 46th President of the United States?
Let’s see what the analysts have to say!
What’s happening?
The greenback lost around 7% versus other major currencies in 2020.
The USD became less attractive when the Federal Reserve lowered interest rates to the minimum.
As a result, EUR/USD, GBP/USD, and AUD/USD rose to 2018 highs.
Another factor was that Donald Trump spent much of the last four years calling for a weak USD because this made US exports more competitive.
Will Joe Biden behave differently?
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What to expect?
Trump is Republican, and Biden is a Democrat, so naturally, you can expect things to change.
The new President has already unveiled a proposal to spend $1.9 trillion to jumpstart the US economy and offset some economic damage driven by the ongoing coronavirus crisis.
The Congress has yet to vote for his plan.
It may turn out that the actual amount is lower.
Nevertheless, it will probably exceed the sums Europe and other developed nations can afford anyway.
In addition, Janet Yellen, Biden’s choice for the key position of Treasury Secretary, will likely stress that the US won’t seek a weaker USD for competitive trade advantage.
It sounds quite positive for the American currency.
The main risk for the scenario of the stronger USD is that traders will turn more optimistic and go away from the ‘safe’ and ‘respectable’ US dollar to the AUD, the NZD, the CAD, the EUR, and the GBP.
It, however, may happen later.
How to trade through?
As we have mentioned, the USD depreciated a lot last year.
In January, traders started closing their USD sell trades.
This new trend can continue. Watch the technical levels and grasp the shift!
- Currencies
- For now, EUR/USD is still in an uptrend. The key area is between 1.20 and 1.1920. Once the pair falls below this point, the way down to 1.16 will be open.
- Stocks
- The average first-year gain for stock markets under Democratic presidents is 11.3%. In the short term, the performance of the S&P 500 will depend more on this month’s earnings reports of such giants as Facebook, Google, and Amazon.
- Gold
- Biden’s determination to fight Covid-19 is a negative factor for the precious metal. Keep an eye on the support at $1 770.
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Comment by Damian F.
December 20, 2023
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