Risk appetite sentiment in financial markets this morning is positive in part due to signs of progress on a US fiscal stimulus package.as Senate Majority Leader Mitch McConnell, a Republican, appears poised to agree to a stimulus bill worth around $ 900 billion. Derek Halpenny, Head of Research for Global EMEA Markets and International Securities at MUFG Bank, hopes that US dollar depreciates at year-end due to stimulus and larger FOMC bond purchases.
Key Comments:
“The Secretary of the Treasury of the United States, Steve Mnuchin, presented a new plan to Nancy Pelosi and Chuck Schumer. The $ 916 billion plan includes state and local government aid and liability protection for companies, the two issues that have blocked progress. “
“While the new plan is a positive development, Democrats still seem more supportive of the bipartisan $ 908 billion plan, given that Democrats believe it has a better hope of progress in Congress.”
“A plan confirmed just before the FOMC on December 16 would be intriguing and potentially prepare markets for a double hit of combined fiscal and monetary stimulus. The FOMC will be under pressure to act given the escalation of COVID-19 and the restrictions that accompany it. A confirmed stimulus plan and the FOMC announcing an increase in purchases of longer-term Treasuries would be a recipe for the US dollar to weaken towards the end of the year.“.
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