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On Wednesday, the evergreen buck proceeded with its dive, with the USD index losing 0.5% versus its major counterparts because the outcome of a split American Congress backed hopes that any key American fiscal policy boost to the US economy can hardly occur now.
In 2018, in the foreign exchange market, the evergreen buck has appeared to be the surprise winner on the back of Donald Trump's fiscal stimulus as well as firm economic data that has made the Fed announce higher interest rates.
However, market watchers are assured that the outcome of the American midterm, including Democrats taking the House and also Republicans controlling the Senate, makes any further American policy boost problematic. US leader’s policies might also come under enormous scrutiny, powering fresh political uncertainty.
The likelihood of less fiscal stimulus would also diminish the pressure on the major US bank to keep lifting interest rates and also apply downward pressure to US Treasury gains and the evergreen buck. Across the board yields on American debt dived 3 to 5 basis points.
Meanwhile, swap markets currently expect nearly 65 basis points in cumulative rate lifts until September next year, although traders are assured that it might dive further if bond gains extend their dive.
Versus a basket of its counterparts, the evergreen buck dived by 0.5% hitting 95.758, which is its lowest value for more than two weeks. Additionally, the profit on 10-year American Treasury debt headed south by four basis points reaching 3.18%.
Notwithstanding the prospects of greater American political uncertainty in the short term, stock markets managed to ascend on expectations that the reduced likelihood of more fiscal stimulus would conclude a multi-year American rate lift cycle.
High-yielding currencies, including the Australian dollar as well as the New Zealand dollar didn’t lose, while safe-haven currencies, including the Swiss franc and the Japanese yen dipped.
During the daily press briefing of Andres Manuel Lopez Obrador, it was announced that Mexico will receive 1.4 million doses of the vaccine by the end of January. Is that optimistic enough for the peso?
The US unemployment claims are announced on Thursday at 15:30 MT time.
The Canadian monthly GDP is announced on Wednesday at 15:30 MT time.
Poor US data, slow vaccine distribution, rising virus cases worsened the market sentiment and underpinned safe-haven currencies like the USD, and JPY.
The European Central Bank will publish the monetary policy statement with the interest rate decision on January 21, at 14:45 MT time.
Joe Biden is going to unveil a Covid-19 relief package of about $2 trillion. After this announcement, the 10-year Treasury yield rose, adding support for the USD.
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