EURUSD Consolidates Around 1.2150, Investors Cautious

14 Jan 2021 · 3rd Party Analysis

EURUSD Consolidates, Investors Cautious


In Summary

  • Another stimulus package is a possibility
  • The American economy is still shaken by the pandemic

The EURUSD has been consolidating this week around the levels of 1.2130 to 1.2160. The US dollar has strengthened throughout January but has recently been facing challenges on its way to higher grounds. Against the euro, the greenback is still not able to break the lower barrier resting around the 1.2100 mark. On Monday, the EURUSD pair went as low as 1.2132 and has since consolidated in the same region with a short-lived uptick to 1.2222 on Wednesday.

According to a report published on Thursday, President-elect Joe Biden is considering to propose a $2 trillion increase in fiscal spending to aid the US economy as it continues to battle the effects of the coronavirus pandemic. Mr. Biden is due to make a public speech on Thursday where he is expected to unveil the major Covid-19 relief package. The stimulus bill would be the first attempt in 2021 for the US government to step in and inject fresh liquidity into the market and the economy. If announced officially, Biden’s proposal will have a long way to go before becoming law. Indeed, there is already opposition to an increase of the stimulus checks for individuals from the $600 that’s already been approved to $2,000.

Cautious Optimism Characterizes the Market

The American economy continues to be rattled, as highlighted in the latest jobs report. For December, the US has lost 140,000 jobs, according to the Labor Department, making Biden’s job increasingly difficult. Additionally, as the new year unfolds, the US suffered its worst day in terms of Covid-19 deaths. On Tuesday, the US reported 4,327 deaths, averaging more than 3,300 deaths per day for the last seven days. More than 3 million new US cases have been reported since the start of the year. According to the CDC, a little over 10 million Americans have been vaccinated.

The news of the anticipated stimulus package did not have an immediate effect on the EURUSD exchange rate. Market participants remain cautiously optimistic as they continue to monitor the impeachment process that will now be handed over to the Senate. Within this context, lawmakers will have to vote whether or not to convict President Trump of “high crimes and misdemeanors”. If convicted, he will be removed from office and will not be able to hold public office again. Before the vote takes place, President-elect Joe Biden will be officially inaugurated as the US President on Jan 20.

Alongside the expected announcement of the bigger-than-expected stimulus package of about $2 trillion, other market-moving news today that could impact the EURUSD rate include the ECB minutes and US weekly jobs data, as well as Fed Chair Jerome Powell’s speech due later today.

Across the European markets, main indexes kickstart the day with moderate gains. The German DAX is leading the pack, up nearly 0.50%, followed by the UK’s FTSE100, up a little over 0.30%. The French CAC40 is higher by roughly 0.20% in the early trading hours of the European trading session on Thursday. On the other side of the Atlantic, equity-futures point to a relatively flat open for the Dow, S&P500,/ and the Nasdaq Composite.

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