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01.02.2021 10:05 AM
EUR/USD: Biden to meet with GOP senators to discuss alternative stimulus plan

US President Joe Biden announced that he is ready to meet with GOP senators today to discuss alternative stimulus proposal for the US economy. Just recently, the Republican Party proposed a plan that amounts $ 600 billion, in response to Biden's $ 1.9 trillion bailout plan.

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The media reported that Biden talked with Susan Collins on Sunday to get a group of Republican senators to meet at the White House to exchange views on a new economic bailout plan. Republican legislators have accepted it and the meeting will take place today.

The meeting could mark the beginning of a bilateral deal that will help the US economy. However, Republicans still do not agree with some points of the new program, which will create quite a lot of obstacles during the negotiations.

Nonetheless, Democrats continue to press that COVID-19 poses a serious threat to the country, and that economic conditions are dire for many. In this regard, it is necessary to take urgent measures of assistance. However, Republicans do not agree with this as they believe that excessive spending of money will only harm the US economy. There are also some that are concerned that funds may go to people who do not really need them. Households in need and that have actually been hit by COVID-19 are far more likely to spend money immediately, which will spur the economy to growth, than households that will not rush to spend their savings to pay off debt.

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The Biden administration insists on paying US households an amount of $ 1,400 as part of a program to support people severely affected by the pandemic. According to the new president, the new $ 1,400, plus the $ 600 paid at the end of last year, will provide significant support both to the economy and the population.

In fact, according to the US Department of Commerce, cost cuts are now not in line with rising income, indicating the people's more cautious stance on spending. Personal income has risen by 0.6% in December 2020, after falling by 1.3% in November. The Economists had expected it to rise by 0.1%. Apparently, income increased due to the increase in state social benefits and compensations. Meanwhile, personal spending fell by 0.2% in December 2020, after falling by 0.7% in November. Economists had expected the indicator to drop by 0.4%. As for personal savings, the index jumped to 13.7% in December, from 12.9% in November. According to the latest data, households have accumulated $ 1.6 trillion in savings since the onset of COVID-19 crisis. It is possible that after the end of the pandemic, this money will pour into the US economy,

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With regards to other statistics, the University of Michigan reported that consumer sentiment in the US decreased to a much lower level than expected, dropping to 79.0 points from the preliminary value of 79.2 points. But despite the decline, the overall level of the index shows only relatively small changes since the start of the second wave of the coronavirus pandemic.

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Home sales in the US also declined according to the National Association of Realtors (NAR). It fell by 0.3% and reached 125.5 points in December 2020, after dropping by 2.5% to 125.9 points in November. Economists had expected the index to decrease by only 0.1%.

Meanwhile, the report on business activity in Chicago pleased traders, having increased to 63.8 points this January, from 58.7 points in the previous month. A reading above 50 indicates that activity increased in the region.

As for the EUR/USD pair, the scenario has not changed much. But if the quote breaks above 1.2135, demand will surely increase in the market, which will bring the euro to a price level of 1.2180 or 1.2220. But if the quote consolidates below 1.2100, EUR/USD will drop to 1.2050, and then go to 1.2020.

Jakub Novak,
Analytical expert of InstaForex
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