The US dollar was opened in a weakened condition. That was in the early sales of this week. It happened after the stimulus package was agreed by the American senate last week. Until now, USD is at a 91.91 level which is 0.07 percent weaker.
A bill on stimulus proposed by Biden for the pandemic fund was officially legalized by congress after a long time. The voting result done by the senate last weekend generated a voice of 50 – 49 after a fairly heated debate between two parties.
Those are the democrats and republic. That stimulus package consists of a cash payment fund of up to $1400 for the people of America. It also consists of the jobless allowance of up to $300 until September. Other decisions are also taken.
The Detail of the Stimulus Fund
Based on the information, that stimulus also decides the fund of $350 billion that will be allocated for the states in that country. $130 billion is used to support education, $49 billion is for the need of vaccine research in America.
Meanwhile, $14 billion is for distributing the vaccine. The market optimism due to the economic recovery is now stronger. That is turning on the interest of the market risk and making the commodity currencies are higher than before. It can be seen from the data.
The AUD/USD pair is 0.45 percent stronger in 0.7710. Meanwhile, the USD/CAD is weaker by about 0.14%. It is at the 1.2629 level because of the increase in crude oil price lately. The analyst said that the sentiment for the dollar is better so far.
It is because of the positive fundamental data. However, the greenback will continue to fight against the commodity currencies amidst the strong expectation. It is due to a rebound prospect in global sales. A significant difference can be seen.
The Prediction of USD in the Future
The commodity price will continue to rise in the middle of a quick global economic recovery this year. That is why; it is impossible for the US Dollar to continue to strengthen the commodity currency pairs. However, it is different from Yen.
An analyst predicted that the USD will continue its strong position to Yen. It is because the dollar is supported by the interesting yield obligation of America which is stronger significantly. In the other places, there is an update stated by the Fed’s leader.
Jerome Powell predicted that there will be a push of inflation in some times in the future. However, that possibility will not push the Central Bank to state the rate hike. The Fed itself is now in a condition in launching the obligation purchasing program.
The amount is $120 billion per month and also the mortgage-backed securities or MBS. It seems that the Fed will not be tightening the monetary policy. Vice versa, Powell made his statement before this is stronger. He didn’t expect a long inflation increase.
How Much Inflation Desired by the Fed?
The Fed wanted the US inflation is still around 2%. Why? That number is a signal that the economy there is healthy. The Central Bank is still providing a space to cut the interest rate during the crisis. Unfortunately, a different thing happens.
Until now, American inflation is still under the target and it is weaker because of the coronavirus pandemic. Powell said that to increase the interest rate, the economy with a full employment situation is needed. The right inflation target is also a must.
It means that the inflation must be above 2 percent continuously just like stated before. However, he stated again that the Central Bank will maintain the interest rate between zero and continue the obligation purchasing program like what they have planned before.
