26.10.202011:29 Forex Analysis & Reviews: Will the US dollar benefit from Bidenomics?

Long-term review

Exchange Rates 26.10.2020 analysis

The market is not abated by disputes about the positive and negative impact of two key financial strategies of the current president Mr. D. Trump against his rival, Democratic candidate Mr. J. Biden, a week before the US elections. Analysts are taking into consideration the pros and cons of the so-called "Bidenomics." This is the monetary policy that the representative of the US Democratic Party adheres to.

Experts believe that Joe Biden's monetary strategy (Bidenomics) is capable of reviving the national economy, as the potential president is ready for significant expenses to support the population and businesses affected by the COVID-19 pandemic. As the second wave of COVID-19 arrives, these trends have strengthened. According to preliminary calculations, he can spend $ 2 trillion to restore the suffering US economy. This amount is also expected to include clean energy financing and infrastructure upgrades in the United States.

Joe Biden's campaign program implies an increase in federal payments for the poor, including social security recipients, as well as for Americans who buy homes for the first time. Moody's analysts estimate the total cost of this program will require an additional $ 7.3 trillion in public funds. It is not excluded that the implementation of these plans will drag on for the next ten years.

Experts are sure that not only current expenses, but also tax increases will be unprecedented. They will grow exponentially, as Joe Biden emphasized that he will raise the already extremely high rate for corporations. At the same time, the candidate from the Democratic party intends to cancel the tax cuts initiated by D. Trump for citizens with an annual income above $400 thousand. According to economists, the main source of funding for Joe Biden's programs will be tax deductions.

The current situation contributes to the increased volatility of the USD. Experts are afraid that this currency will noticeably decline, if Joe Biden wins; nevertheless, they are counting on the latter's strong recovery abilities. An additional factor of pressure on the US currency is a significant increase in the Fed's current balance. Last week, it has increased by $25.83 billion, to $ 7.17 trillion. It should be noted that the Fed's assets increased by $76.7 billion in early October. As a result, the regulator's balance reached a new historical high.

Analysts warn that the active money printing in the United States will not benefit the US dollar. Moreover, negative trends also affect the EUR/USD pair. The classic pair tries to achieve balance, but these attempts are not always successful. Today, it is trading near the range of 1.1842-1.1843, exceeding the values of the previous week.

Experts agree that Bidenomics has reflected the trends taking place in many democratic countries. Its focus is to strengthen the role of the government and its active presence in the economy. It is noteworthy that if it is impossible to control the Senate, the Democrats headed by Joe Biden will not be able to implement most of their plans. At the same time, the alleged head of state does not seek to radically change the current economic course. At the moment, authorities are trying to mitigate the devastating effects of the COVID-19 in the United States, as in other states. Therefore, Mr. Biden is expected to act in this scenario.

Most experts also said that Biden will ensure the effective development of markets and give a new impulse to the US economy. And although some economists are inclined to the opposite opinion, they admit the expediency of his strategy. Therefore, it is possible that the majority will be right, and so the US economy will recover.

Larisa Kolesnikova,
Analytical expert
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