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Multiple factors are working against the dollar’s strength. Biden’s trade policies not being as aggressive as Trump’s increased the negative slide, but lockdown-induced uncertainty continues to rupture the road to recovery. Meanwhile, social safety networks leave much to be desired.
New Year, New President, New Trade Policies
The dollar continues to weaken against all major currencies: Euro, Japanese Yen, Canadian dollar, Australian dollar, Swedish krona, and British Pound sterling. This Friday marks the end of the worst week so far for USD, bringing it to a nine-month low. In numbers, the dollar index has fallen 1.2% for the week, and 12.7% from its three-year peak this March.
The outcome of the US presidential election signified this slide. The incoming Biden administration is expected to prioritize cooperation over American-focused deals in international trade, especially against the EU. However, the domestic situation worsens USD prospects further.
Prolonged, intermittent lockdowns across the country are taking a massive toll on small businesses. In September, Yelp data painted a dire picture – 60% of lockdown-induced business closures became permanent, accounting for nearly 100,000 small businesses. Most recently, Alignable Rent Poll shows that the situation is getting worse.
Culling of Small Businesses Continues
Covering over 9,000 businesses, the poll reports that 61% of restaurants are unable to pay December’s rent, constituting an increase of 19% from November. In total, 35% of small businesses are unlikely to pay this month’s rent, which is an increase of 3% from November. Such record-high economic instability is yielding predictable results.
Even though tracking real employment is not as precise as it should be, unemployment claims mirror wide-scale governmental disruption of the private sector. This week, jobless numbers have topped projections, at 885,00 first-time unemployment claims, which is an increase of 10% from forecasts. Currently, over 20 million Americans are beneficiaries of unemployment benefits, with 14 million standing to lose them if the federal government does nothing until 26th December.
Despite multiple delays and negotiation hiccups, the second bipartisan round of stimulus checks should be finalized today, issuing direct payments of at least $600 per individual. In anticipation of the deal, the stock market is rallying, with Dow Jones rising by over 100 points. Nonetheless, stimulus checks, cut in half from March, are not likely to smooth massive economic disruption caused by lockdowns.
Unemployment Takes its Toll
Among developed nations, at least 12 million Americans have lost employer-based healthcare insurance during the pandemic. On top of the rising unemployment rate and looming evictions for both businesses and households, this makes American recovery less likely to follow through in full swing compared to a European one.
Consequently, the dollar reached its two-year low against the Euro, with the latter trading at 1.22. Meanwhile, the British Pound slightly recoiled against USD as the post-Brexit trading deal is reaching the deadline.
As the pandemic subsides on its own, do you think the targeted economic and social damage inflicted will be worth it in the long run? Let us know in the comments below.