Market focussed back on the size of the Biden fiscal bonanza
|The Congressional Budget Office, (CBO), released a study showing the US economy will return to pre-pandemic levels even without another shot of stimulus.
However, the CBO projects the unemployment rate falling to 5.3% by year-end. While down from the 8.4% forecast by the CBO back in July.
In recent trade, the US Treasury Secretary, Janet Yellen, has said to have stated that the economic aid package is desperately needed, likely referring to the fact that there will still be millions out of work who will need financial assistance.
It ''will be years before us reaches full employment again based,'' she said.
Meanwhile, the US President Joe Biden has been rising the prospects, along with a group of ten Republican Senators, for a $618 bln alternative to his $1.9 trln proposal.
However, the US Senate Democratic Leader Chuck Schumer said Biden told Democrats the proposal that the ten Senate Republicans have made for $600 billion in COVID-19 relief is "way too small."
While this is the grounds for a probable compromise for something in the region of just over $1trln, Democratic lawmakers are still forging ahead with the idea of passing much of Biden’s proposal via the budget reconciliation process.
Only a simple majority passage in both houses could clinch the deal.
Meanwhile, looking ahead, all eyes are on the Nonfarm Payrolls data at the end of the week.
A clue for Friday jobs data yesterday came yesterday.
While headline ISM manufacturing PMI eased to 58.7 from a revised 60.5 (was 60.7 in December), the employment component rose to 52.6 from a revised 51.7 (was 51.5) in December which was the best reading since June 2019.
However, Services PMI today will be more critical, but the economy is starting the year off on pretty firm footing and will potentially keep the US dollar underpinned in its plight for higher grounds.
In positioning data, a short squeeze could be on the cards if the CFTC data is finally going to catch up with the bid in the spot market.
Indeed, with the first Federal Reserve interest decision meeting of the year now out of the way, the market will be focussed on the size of the Biden fiscal bonanza and the success of vaccine roll-out programmes.
DXY daily chart
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