U.S. dollar to remain on the back foot - MUFG
15.01.2021, 11:37

U.S. dollar to remain on the back foot - MUFG

FXStreet notes that President-elect Joe Biden’s fiscal plan, announced in Delaware yesterday, is large at $1.9 trillion and triggered a jump in the UST bond 10-year yield of about 4bps but much of that move has already been reversed. Biden’s fiscal plan is large but the market scepticism is justified, according to eceonomists at MUFG Bank who expect the U.S. dollar to continue the downtrend despite a short-term strength.

  • “The reality is that while the Democrats now have increased power having won the run-off elections in Georgia last week, that power still has its limits and the details of the fiscal package suggest the overall size will be whittled down before it gets the support required to get through the Senate.”
  • “The drop in the UST bond 10-year yield indicates expectations of a paring back of this plan, which to us looks understandable. However, Biden has a long history of achieving compromise and there are certainly risks of surprise and this fiscal plan could still end up larger than the markets currently assume."
  • “While short-term, the US dollar could extend further, the big picture backdrop for the dollar remains negative. Fed rhetoric and even a watered-down Biden fiscal plan underline the negative backdrop that lies ahead.” 

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