Talks Heading Down to The Wire

Investors are anxiously awaiting headlines around US fiscal negotiation today. House Speaker Nancy Pelosi yesterday announced a 48-hour deadline for the talks, due to expire at the end of today’s US session. Democrats continue to push for a broader $2.2 trillion relief package while Republicans have reaffirmed their commitment to a much narrower $1.8 trillion package.

Along with the much bigger aid amount, Democrats are in favour of delivering wider support to those who have lost their jobs as a result of the pandemic, including enhanced tax credits for affected families and state aid for those areas most impacted. Trump has previously said that he is in favour of delivering a second round of direct cheques to affected individuals/families of up to $1,200, so there is still some hope for a deal to be done. However, the headline figure amounts are still significantly mis-aligned.

Conflicting Messages

Markets have been whipsawed recently over headlines relating to the stimulus negotiations. Trump recently declared that he was ceasing talks around delivering a stimulus package ahead of the elections. Taking to Twitter, trump announced that due to the Democrats looking for a significantly higher aid amount, he was pulling out of talks and wouldn’t be looking to deliver a new aid package until after the elections. However shortly after these comments, the US president said that he was still in favour of delivering direct aid to affected individuals and small businesses. Presumably in consideration of the impact on his ratings, Trump’s team have restarted negotiations with the opposition with a view to agreeing a deal ahead of the elections.

Senate Vote in Focus

Following a 53 minute telephone call yesterday between treasury secretary Steve Mnuchin and the House Speaker, the two sides were said to have “continued to narrow their differences”. However, with the two sides still roughly half a trillion dollars apart in terms of the headline aid figure, talks are expected to go down to the wire. Furthermore, the Senate majority leader Mitch McConnell has said that there will be a separate vote on Wednesday over the $500 billion proposal to target specific areas in need of aid. Many Republicans in the senate have been strongly opposed to passing any further aid packages following the $3 trillion package passed earlier in the year. This raises concerns that even if Mnuchin and Pelosi can agree a deal, it would fail to pass the senate anyway, which would be a major blow to risk appetite given the rising fears of fresh economic damage from renewed COVID restrictions and loss of employment.

Technical Views


From a technical viewpoint. Following the failure at the 94.61 level, the Dollar Index has no stalled at a retest of the 93.81 level and bearish trend line from 2020 highs. While below here, the market looks vulnerable to a further move lower, targeting support at the 92.62 level next.

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