Trump veto threatens to derail stimulus package
The unpredictability of President Trump provided a shock overnight that sent risky assets tumbling as Congress’s hard-fought battle for a fiscal relief deal seemed in jeopardy. Trump is making a push for USD2,000 checks, much more than the USD600 that has already been agreed upon. The current deal that Congress put together is a band-aid fiscal support solution that keeps unemployment benefits and support for small business lasting till March. Trump wants a substantial coronavirus stimulus package that might make a difference for households. Something needs to get done by December 28th and right now markets are expecting that we could see a last-minute tweak that provides more stimulus for Americans. With less than two weeks to the two Georgia Senate runoff races, Republicans do not want to jeopardize Trump’s support ahead of the elections that will determine who controls the Senate. A bill is still widely expected before December 28th, but how we get there is not clear.
US dollar falls as France reopens border with UK
The dollar is broadly declining against its major trading partners after France reopened routes with the UK and on hopes that Brexit negotiators will be successful in delivering a last-minute trade agreement. Europe is battling COVID-19 and can’t afford to have Brexit negotiations go beyond the end of the year.
High-beta currencies are also rallying against the greenback on hopes that the COVID vaccines are expected to work on the new strain of the virus. Thin conditions will likely persist, and the dollar will take its cues from the Republican reaction to President Trump’s demand and if the EU and UK can have a fishing breakthrough.