EUR/USD Rate After Biden’s Presidency

On January 20, 2021, Joe Biden was sworn in as the 46th President of the United States. The event was taken cautiously by the EUR/USD traders as no big moves were seen in the pair’s trading. In the run-up to the inauguration ceremony, the pair started the week at 1.2074 and briefly touched the week’s high of 1.2158 on the inauguration day before going down to 1.2104 later in the day. The euro gained ground during the next two days following Biden’s ascension to the presidency and, at the time of writing, the pair is trading at 1.2170. So far, during the week, the euro has gained 0.8 percent against the U.S dollar.

The dollar has been on the decline for three consecutive days, the first time during the month. President Joe Biden has started signing executive orders and is seeking support for his $1.9 trillion stimulus package. With no new taxes, the stimulus package will likely be financed by borrowing from the Fed. The development seems to be contributing to the downfall of the greenback, benefitting the euro. Any new development on this front is likely to influence the EUR/USD exchange rate in the future.

Also, strong equities, with the stock market achieving record highs, are shifting the interest of investors away from the safe haven, greenback, into the equities. Analysts expect a slight drop in the US unemployment figures, which may prepare the ground for approving the $1.9 trillion stimulus package proposed by Joe Biden’s administration. Besides, the Biden administration is likely to increase corporate taxes as well.

Also contributing to the upward EUR/USD trend is the European Central Bank’s likely decision to maintain the interest rate at -0.5% in its upcoming monetary policy announcement. ECB is struggling to achieve the desired 2% rate of inflation as the most recent inflation figures hovered at around 0%, prompting the ECB to keep the interest rate unchanged instead of reducing it further.

Also, the Biden administration is making efforts to increase the distribution of Covid-19 vaccines to curb the disease. On the other hand, Europe has been slow in procuring and distributing the vaccines from Pfizer. It remains to be seen whether the vaccination helps reduce the level of infections and how quickly the regions come out of the negative impacts of the pandemic.

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