After a race that is the most volatile in history, Biden declared his victory in the presidential elections on Saturday, and according to the outcome of the Senate elections, there will be no ability for the Democrats to introduce any fundamental changes to the fiscal stimulus and tax increases.
This will result in the continued division of Congress after the election results have shown.
As the chances of a blue wave controlling the election results dissipated, the yields of long-term US bonds fell sharply on the back of expectations to reduce the fiscal stimulus package. The decline in US bond yields also contributed to reducing the dollar’s attractiveness to investors.
Joe Biden’s outperformance coincided with the decline in US 10-year Treasury yields from their highest levels recorded last week at 0.9197% to 0.7178%.
In terms of foreign currencies, the report mentioned that the US dollar witnessed sharp declines against all major currencies, and the dollar index reached its lowest levels recently recorded, trading in a range between 92,000 and 94,000, as expectations that the Biden presidency will reduce or end trade policy The collision course adopted by Trump in promoting risky assets.
Simply put, Biden is the least controversial option for the rest of the world.
The dollar index reached its lowest level in two months, reaching the level of 92.184, approaching its weakest level in nearly two and a half years. On a weekly basis, the Australian dollar outperformed against the US dollar + 3.39%, the Norwegian krone + 4.32% and the New Zealand dollar + 2.61%, and it came at the top of the G10 currencies, which succeeded in benefiting from improved risk appetite sentiment.
As for the Chinese yuan, it is trading against the dollar at its strongest level since July 2018, reaching 6.6023, recording a growth of 1.25% last week.
Looking at the performance of Wall Street stocks, the three main indexes managed to post huge gains.
On the other hand, the increasing expectations of a split in the US Congress make high US interest rates an unlikely matter, which contributes to enhancing the performance of stocks.
The S&P 500 index rose by 6.5% last week, putting the benchmark index on the right track to achieve its best performance during the election week since 1932.
The Dow Jones index did not differ much from the same path, as it rose by 6.11% on a weekly basis.
In view of global stocks, Morgan Stanley’s index of all countries of the world, which covers the performance of about 85% of the total global investment opportunities, has increased by more than 7% since the end of last month.
The report indicated that monetary policy makers at the Federal Reserve adopted a wait-and-see approach at their last meeting, as they avoided involving the Fed in the election dilemma.
As a result, the federal funds rate remained at its lowest levels between 0% and 0.25%, and the bank indicated its intention to maintain these levels until at least 2023.
Thus, the possibility of its balance sheet playing a fundamental role in supporting the economy through the bond-buying program increases.
The Federal Reserve chief also stressed the importance of government financial aid to support the economy, especially at the present time after previous rounds of fiscal stimulus packages were largely exhausted.
Monetary policy officials kept the door open for a possible shift in Fed bond purchases in the coming months and they are expected to meet again on December 15-16.
A bleak path for the British economy
Al-Watani’s report indicated that the British economy witnessed an unprecedented contraction of 19.8% in the second quarter of this year during the most severe periods of the imposition of the embargo measures nationwide.
With the imposition of closure measures again at the present time, these developments put the future vision of the British economy on a bleak path.
This forced the Bank of England to reduce its economic growth prospects, as monetary policy officials expect the economy to contract by 2% in the fourth quarter of this year, which led to deepening deflation expectations for the current year to reach 11%, and the economy may be able to regain its size. Before the pandemic only in the first quarter of 2022.
On the other hand, the euro and the British pound against the US dollar rose last week to their highest levels since October 21st.
The euro rose almost 2%, while the British pound rose 1.50%.
However, there are strong resistance barriers for the two currencies, which may lead to a performance reversal in light of the prevailing climate in Europe, which is not considered one of the places where we may necessarily witness high levels of confidence.
The rise in the euro and the British pound may be due to the weakening of the US dollar at this point.
Australian Central Bank: We are in recession
The National Bank of Australia’s report said that the Reserve Bank of Australia cut interest rates (the main interest rate, bank lending facility rate and yield curve target) from 0.25% to 0.10%, in what is considered the lowest levels ever recorded.
Monetary policy officials did not stop there, as the board also announced a program to purchase government bonds with maturities ranging from 5 to 10 years over the next six months, worth up to A $ 100 billion.
Central Bank Governor Philip Lowe hinted that the liquidity rate should not rise in the next three years.
“I do not know how anyone concludes that we are not in a recession,” he said, adding, referring to current media reports that the recession has ended: “According to any reasonable definition, we are in a recession.”
In light of the quantitative easing measures announced last week, the RBA began to exhaust the tools to control interest rates and the governor’s tone confirmed this.
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