No break in the USD bearishness
MUFG Research maintains a bearish bias on the USD into the year-end.
"US Treasury Secretary Steve Mnuchin presented a new plan to Nancy Pelosi and Chuck Schumer. The USD 916bn plan includes state and local government aid and liability protection for businesses - the two opposing issues that have blocked progress," MUFG notes.
"A plan confirmed just ahead of the FOMC on 16th December would be intriguing and potentially set the markets up for a double-whammy of fiscal and monetary stimulus combined. The FOMC will be under pressure to act given the escalation of COVID and the restrictions that go with it.
A confirmed stimulus plan and the FOMC announcing an increase in purchases of longer-dated UST bonds would in our view be a recipe for the US dollar to weaken into the end of the year," MUFG adds.
