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Details of Joe Biden’s new relief plan. Jerome Powell has calmed the markets, and Germany plans to strengthen quarantine



DATE OF PUBLICATION: 2021-01-15 09: 51: 51 Yesterday’s emphasis could be placed on the speech of the Chairman of the Federal Reserve System Jerome Powell, as well as on the plan to help the economy proposed by the new American President Biden. And if Powell has managed to calm the markets and restore strength to the US dollar, then the next 1.9 trillion US dollars that can be pumped into the US economy is unlikely to benefit the dollar. But things are not so good in the EU. Germany is slated for a tightened lockdown and new isolation measures. First things first. Federal Reserve Chairman Jerome Powell yesterday nipped talk of prematurely cutting back the Central Bank’s massive bond buying program, saying “now is not the time” for such speculation. “We know we need to be very careful when discussing the asset purchase program,” he said Thursday during a virtual conference. Powell also drew attention to the fact that cutting off stimulus programs too early would be more negative for the economy than a later decision. Let me remind you that at the beginning of the week some Fed officials raised the topic of winding up stimulus programs in 2013, which led to a sharp surge in market volatility. … It was about the fact that a strong economic recovery after the pandemic could lead to a reduction in bond purchases at the end of this year. Emphasis was also placed on the new aid program proposed by the Democrats, which will take some of the burden off the Federal Reserve. But during his speech, Powell said firmly that the economy was still far from its goals, and noted that the lesson from seven years ago was when the markets were shaken by the Fed’s decision, and the yield on Treasury bonds soared sharply – it was fully assimilated, and it is unlikely that such rash decisions will be used in the future. Powell also added that as the economy recovers, Fed officials need to be more careful in their words. Let me remind you that following the Fed meeting last month, it was decided to keep the monthly volume of bond purchases in the amount of 120 billion US dollars. Now regarding the new bailout plan from the elected President of the United States Joe Biden. Investors were waiting for the details of this plan yesterday and were slightly surprised by the proposals. In total, the plan is worth $ 1.9 trillion to fight the coronavirus pandemic and support the country’s economy, and includes a wave of new spending, including a $ 2,000 increase in direct payments to households, an increase unemployment benefits; and increased financial support for state and local governments. A significant chunk of the money will go towards expanding vaccination and coronavirus testing programs. New was a proposal to raise the federal minimum wage of $ 15. Experts were divided. Someone believes that Biden’s “American Rescue Plan” is simply necessary due to the increase in deaths from the coronavirus, which has reached a record level, as well as against the background of the expansion of restrictions adopted by local authorities. Others believe that another injection of cash will only fuel the bubbles that led to the 2008-2009 financial crisis. In any case, the data on the labor market, which continues to deteriorate, suggests that it is necessary to act more decisively, which is what Democrats, who have a majority in the House of Representatives and plan to get a majority in the US Senate, use. According to the latest report from the US Department of Labor, the number of initial jobless claims in the United States jumped 181,000 over the week to 965,000. The weekly growth was the fastest since the end of March 2020, when the number of jobless claims jumped by 3 at once. 56 million. Economists were expecting only 8,000 to rise to 795,000. Today, a very important report on retail sales in the United States is expected, which is likely to contract in December this year after a decline in November, as the surge in coronavirus has led to new restrictions on business and reduced economic activity during the important holiday shopping season. Economists forecast that the report will point to a slight decline in retail sales compared to November, despite the fact that e-commerce is booming. After the December report and the start of mass vaccination of the population against the coronavirus, the situation is expected to improve quickly at the beginning of this year, and the economy will begin to show faster growth, while the situation with the European currency leaves much to be desired. Yesterday it became known that German Chancellor Angela Merkel insists on tightening the isolation regime, as the death toll in the country increased by more than 1,500 people for the first time since the start of the pandemic. Merkel intends to meet with regional leaders shortly to discuss additional restrictions amid fears that a new strain of coronavirus, which has already been recorded in the EU, could lead to an infection spiraling out of control. Germany’s daily death toll has risen by 1,589 in the past 24 hours, bringing the total death toll to more than 45,000. New restrictions may include a curfew, complete closures of all schools and the cancellation of public transport. This issue will be discussed at the meeting on January 20. Until that moment, the European currency will clearly remain under pressure in a pair with the US dollar. As for the technical picture of the EURUSD pair, it has not changed much, as trading continues in a sideways channel. Yesterday’s attempt by the bears to consolidate below monthly lows was unsuccessful. At the moment, a more confident break of the 1.2140 support is required, which will push the euro back to the 1.2110 low and open a direct road to the 1.2080 and 1.2040 areas. It will be possible to speak about an upward correction of a trading instrument only after a breakout and consolidation above the resistance of 1.2180, which will push buyers to the area of ​​1.2220 and 1.2280. Material provided by InstaForex – www.instaforex.com Source – InstaForex

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