Potential contraction of the US Dollar is lurking in the horizon. Expert economists forecast a downfall in the Dollar value in Q4 of 2020. The analysis was derived from reduced retail sales in October. However, there is a host of other reasons that is holding back the value of the US Dollar amidst a global pandemic.
Analysts State The Fall Of The US Dollar With Conviction
The core retail sales excluding the sale of construction materials, gasoline, auto and so on showed approximately 0.1% stagnation of the US Dollar. The September retail sales were lower than that of October. Smaller businesses are shutting down and with no prospect of a vaccine or economic aid provided by the government, there is not much hope in the recovery of these lost businesses. Some sources suggest that there is the possibility of a 20% decline in the value of the Dollar.
A lot depends on Georgia’s run-off elections scheduled in January, notifies officials. The Financial Research’s Treasury Department mentioned in a statement that many households, individuals and businesses are looking forward to the second round of coronavirus stimulus packages to be back on their feet. The US Dollar along with the entire financial system is at risk now without the optimum flow of the economy.
The Congress is yet to finalize negotiations on the second relief bill, the deadline of which has now been extended till the 11th of December. There is a lot of uncertainty regarding the bill among Americans.
After the election results came out in early November, the market went for a bullish moment when reflation trade began to lift up US Dollar rates. But what it did to the market is steep the bearish curve. After the election results, the market saw fresh highs since March 2020, but shortly softened the rise and flattened the curve.
More Fiscal Stimulus To Lift Up The Economy?
This has led to the belief that there will be more stimulus bills to come in the future. Federal officials suggest the possibility of having more economic aid to pull the market back up.
Many institutions have realized that the odds of intervention from the Feds is increased by the lack of economic aid, the weak data reports and the rapidly surging Covid-19 cases across the country. The Federal Reserve is likely to shift to long-term security buy-ins because of the worsening yield of the nation. According to recent reports, they are $80 billion of Treasuries and $40 billion of MBS per month from the Agencies.
The immediate activation of the second stimulus bill is the only way to lift up the US Dollar. However, Congress has failed to reach an agreement on the bill till now. The negotiations have been going on for months while the American public is left high and dry. Besides this, no proper news on the vaccine and the surging cases have posed themselves as additional challenges to the nation’s fiscal status.
