US Dollar Slips As $2 Trillion Stimulus Package Nears Agreement

The US dollar is continuing its streak of losses midweek as the federal government prepares to pass the $2 trillion stimulus package, which has sparked a rally in equities for two straight sessions. With a heightened risk appetite, investors are pouring into riskier currencies after liquidating everything to buy the greenback throughout the market turmoil. Is the buck set to plunge even further?

On Tuesday evening, the White House and Senate struck a deal on a historic $2 trillion stimulus package to battle the economic fallout from the coronavirus pandemic. The final terms of the deal have yet to be published, but early drafts show cash payments of $2,400 for married couples, $1,200 for individuals, and $500 per child. Small businesses will have access to a $350 billion fund to prevent layoffs and support payroll. Employers will also receive a deferral of payroll taxes that will be paid back in the coming years. The stimulus bill will transfer $150 billion to states and localities, as well as another $55 billion for the overall health care system.
In exchange for Democratic support, the legislation prohibits businesses controlled by President Donald Trump, administration officials, and members of Congress from receiving bailout funds. Stock buybacks will be banned, and certain companies will have government equity stakes.
The federal stimulus program comes after the Federal Reserve unleashed unlimited quantitative easing, promising to buy assets without any limits to mitigate the negative effects of COVID-19.
The virus outbreak has wreaked havoc on the US economy, shedding trillions of dollars from the stock market and forcing the closure of non-essential businesses nationwide. Investors and politicians will pay close attention to Thursday when initial jobless claims are published. Experts are anticipating a reading of around one million, but some analysts say it could top two million.
Elsewhere on the data front, the IHS Markit manufacturing purchasing managers’ index (PMI) slumped to 49.2 in March, down from 50.7 in February. The IHS services PMI came in at 39.1, down from 49.4 in February. Both readings fell short of market expectations. Anything below 50 indicates a contraction.
New home sales contracted 4.4% last month, down from the 7.9% surge in January. The house price index edged up 0.3% in January, down from 0.7% in December.
Last month, durable goods orders jumped 1.2%, up from 0.1% in January.
The US Dollar Index tumbled 0.49% to 101.54, from an opening of 101.54, at 13:55 GMT. The index, which measures the greenback against a basket of currencies, has dropped more than 1% this week.
With a bit more stability in financial markets, forex traders have renewed their appetites for risk. After investors poured into the traditional safe-haven asset during the market chaos, they now appear ready to buy riskier currencies that were the most oversold last week.
The USD/CAD currency pair declined 0.71% to 1.4360, from an opening of 1.4464. The EUR/USD rose 0.1% to 1.0799, from an opening of 1.0790.

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Original from: www.earnforex.com