The Dollar Remained A Safe Haven As Governments Stepped Up Their Battle Against Covid

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On the foreign exchange market, following three straight days of losses, the currency rebounded on Friday. The dollar index (reflecting its evolution against 6 benchmark currencies) was 90.22 points (-0.1 percent) on Friday, benefiting from a safe-haven impact.

The euro stayed solid at $1.2170 (-0.07%) following the ECB’s status quo on Thursday and remarks by its president, Christine Lagarde, who reaffirmed that owing to its negative effect on inflation, the institution was tracking the growth of the euro exchange rate.

Ursula von der Leyen, President of the European Commission, referred to the European health situation as ‘extremely serious’ and ‘strongly discouraged non-essential travel’ between EU countries. France has declared that it would impose a negative PCR test on Covid-19 on every air passenger from other European countries from Sunday onwards (this is already the case for passengers arriving from non-EU countries). For its part, Belgium warned its nationals, until the end of February, against non-essential travel abroad.

In the bond markets, the 10-year T-Bond yield dropped 2 basis points to 1.09% on Friday after touching a high of 1.18% on 12 January, in expectation of an inflation rebound as a result of the 12 January post-economic recovery.

Stock investors are closely monitoring the moves in the passage of the $1.9 trillion budget funding package by Joe Biden, which seems to be greeted with reluctance by Republican senators who refuse to surpass the federal deficit.

The Senate is split between Democrats and Republicans into 50/50 seats, and Vice President Kamala Harris has a casting vote on the Democratic side to tilt the balance. Any Democratic lawmakers, however, will still be hesitant to follow the proposal as it is, which, for lengthy talks, bodes well.

The fund provides $415 billion to intensify the war against Covid and to deliver the vaccine, as well as approximately $1,000 billion in financial assistance to households and $440 billion in funding to the most seriously impacted SMEs and municipalities. Many U.S. families would receive $1,400 checks and unemployment insurance would be increased by $400 a week, up from the existing $300, and extended to September.

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