Stock market
US stock market indices renewed their historical maximums last week on the background of the start of vaccinations in the US, expectations of a new economic stimulus package and due to the results of the Fed meeting.
Republican and Democratic leaders agreed on a $900 billion economic stimulus package, source NYTimes. The package includes $600 direct payments to taxpayers, additional $300 weekly payment to unemployment benefits, funds for small business loans, and vaccine transportation funding. The package is expected to be voted in the House of Representatives soon. Together with the package, it is planned to adopt a government spending bill for 1.4 trillion dollars.
On Wednesday, the results of the Fed meeting were announced, which boosted risky assets. The Fed hasn’t brought changes into monetary policy. The regulator has pledged to continue buying $120 billion of bonds monthly until signs of sustained economic growth emerge.
The Fed improved its macroeconomic forecasts. In 2020, GDP is expected to decline by 2.4% (the previous forecast was a decline of 6.5%), in 2021 – an increase of 4.2% is expected (the previous forecast was an increase of 4%). The unemployment rate in 2021 is projected at 4.5% (previous forecast – 5.5%). Source Reuters
Currency market
The dollar index reached a new 2.5-year low after the announcement of the results of the Fed meeting. However, the dollar strengthened on Monday on rising demand for safe-haven assets amid news that a new strain of coronavirus has been identified in the UK and several other countries, 70% more infectious.
On Saturday, the UK government tightened lockdown restrictions in London and the southeast regions of England. A Tier 4 restrictions (close to those adopted in March) will cover a third of the UK population.
Several European countries, including France, Italy, the Netherlands and Belgium, have restricted transportation with the UK. Against this background, the pound exchange rate fell to a 10-day minimum. Lack of progress in negotiations on a trade agreement between the EU and the UK also exerts downward pressure on the pound.
Main events of the current week
On Tuesday, data on retail sales in Australia, UK and US GDP, consumer confidence index and existing home sales in the US will be presented.
On Wednesday, data on Canadian GDP, jobless claims and new home sales in the US, as well as crude oil inventories will be published.
US durable goods orders are due on Thursday.
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