29.12.202009:48 Forex Analysis & Reviews: US dollar can arrange a Santa rally

The US currency continues to weaken before the New Year, surrendering to the risk-sentiment dominating the market. Analysts believe that the main driver for this decline is the signing of another stimulus package to restore the US economy.

The expectation of fiscal assistance contributes to increased risk appetite, which is why traders lose interest in reliable assets, primarily the USD. It should be recalled that on the night of December 28, US President Mr. Donald Trump signed a document on the state budget for next year, which includes a package of assistance to the national economy in the amount of $ 900 billion. It includes one-time payments to Americans of $600 per person, increased unemployment benefits, small business financing, etc.

As for the volume of the state budget, it is known that $1.4 trillion has been allocated for public spending by the end of the current fiscal year. This amount also includes spending on funding the US Federal agencies. Analysts believe that this package is a so-called "safety cushion" for the US economy, which will help the markets to further grow.

Earlier, the head of the White House insisted on increasing payments to $ 2,000. This morning, it was reported that the US House of Representatives approved this payment by submitting the bill to the Senate. According to experts, the Senate's decision can disturb the currency markets, and the approval of the amount of $ 2,000 will become an impulse for the "Santa" rally. This refers to the market's tendency to rally over the last weeks of December into the New Year.

Based on experts' observations, the signing of the document on fiscal aid has become a strong driver of growth in the stock market. On the first day of the pre-New Year week, US stock indices soared to new historical highs. At the same time, the approval of the stimulus package, which positively affected the stock market, weakened the US dollar. The indicated currency is still under inflationary pressure, as the issuance of additional money to the population contributes to the next round of inflation. It should be recalled that the increase in government spending in the US provokes the weakening of the national currency.

The EUR/USD pair was moving around the range of 1.2239-1.2240 on the morning of December 29. Currently, it is rising to the level of 1.2241. At the same time, the dollar index declined by 0.26%, that is, to 90.1 points. It remains at the low for the past two years.

Experts expect further drawdown of the US dollar, despite the market's optimistic mood and the high probability of a Santa rally. They predict difficulties for the dollar both in the current and the upcoming year. Nevertheless, analysts agree that the US dollar perfectly defends itself from the blow.