GBP/USD. What will change with the coming to power of the new US President Joe Biden? Part 2.


In the first part of the article, we listed the most important election statements of Joe Biden. In this part, we will continue to understand the promises of the Democrats and draw certain conclusions.

Joe Biden also pays very high attention to health care. Even those issues that are not related to the pandemic. Under Barack Obama, a major reform of the health care system was carried out, which Donald Trump has always disliked. Biden promises to continue working toward providing Americans with higher-quality medicine, more convenient and cheaper. The Democrat promises to lower the age thresholds for older Americans in accessing the Medicare program, as well as introduce a new state insurance program, as a result of which the total number of uninsured Americans should fall from 8.5% to 3%.

"Green" energy. Biden promises to take climate change very seriously. According to the Paris agreement, by 2025, greenhouse gas emissions in the United States should be reduced to 28%, and in 2050 – reduced to zero. Thus, the entire civilized world is slowly beginning to switch to "green" energy within the framework of the program of environmental protection, climate change, and increase in the average annual temperature, which has been observed in all parts of the world in recent years. Biden promises to invest $ 2 trillion in this direction and create millions of jobs.

The Democrat also promises to make education more accessible to Americans. First, it is planned to create free colleges throughout the country. Secondly, some Americans who receive higher education on credit are offered to forgive part of their debts in exchange for spending a certain amount of time in public service. Third, parents of young parents will be provided with benefits to pay for child care.

On the international stage, Biden promises to expand cooperation with NATO, increase pressure on Moscow, and counter the growing influence of China by uniting with allied states.

In general, if you compare this election program with many others, you can find a lot of similarities. Every presidential candidate tries to promise as much as possible. But what can be done later is the second question. This is a disease of almost all democratic countries of the world. Thus, the standard package of promises "we will reduce taxes to the poor, we will raise the rich, we will improve the health care and education system" sounds from the lips of absolutely any presidential candidate. Much more important is how Biden will behave on issues that are not a major part of his campaign agenda. After all, this program is designed for ordinary Americans. What do ordinary people care about? Their well-being and standard of living. They care little about the confrontation with China, the pressure on the Kremlin, the conquest of space, the construction of colonies on Mars, and so on. They are interested in taxes, health care, job availability, and salary levels. Therefore, promises consist of 90% of "meeting" these needs of the population. More importantly, how will Biden conduct foreign economic policy? What kind of relations will he build with China, how will he conduct a dialogue with Vladimir Putin and Kim Jong-Un, how will he react to the nuclear program with Iran? However, there is no doubt that Biden will not get worse results than Trump. Trump has ruined his relationship with everyone he could, and in the international arena and domestically. Everyone was constantly fighting against him, from doctors and epidemiologists, who regularly refuted the president's words about the "coronavirus", to Democrats, who tried to block almost any initiative of Trump and discredit him. Thus, Biden can only behave approximately the same as Barack Obama, with which there will be no special problems.

What does all this mean for the US currency? There is a tendency that under Republican presidents, the US dollar is growing, while under Democrats - it is decreasing. With Trump, this trend did not work, as for 4 years of his presidency, the US currency lost 13 cents against the European currency. However, most of the losses occurred in the last year – that is, the pandemic and the global crisis. We have repeatedly noted that in 2020, the markets almost stopped responding to macroeconomic statistics and various fundamental news. Thus, the true reasons for the fall of the US dollar in the last 9 months can be any reason. We remind you that the supply and demand for a particular currency determine the rate of any pair. If the dollar falls, the demand for it is low, or, conversely, the supply is high. How can this factor be fulfilled? For example, if major players in the foreign exchange market get rid of the US currency in the last 9 months. There can be a lot of reasons and most of them may not be available to the general public. Hypothetically, we can imagine that many large banks and investors are afraid of a slowdown in the US economy in 2021(although in theory, it should recover) and therefore are not going to invest money in it, respectively, they do not need dollars. They sell them. Or another situation: the Fed, with the help of an infusion of huge sums of money, increases the supply of the US currency on the market, which negatively affects the exchange rate. After all, the Fed is beyond the control of even the US President. It is an almost completely independent institution. Thus, it can declare some amounts within the framework of QE programs and others to stimulate the economy, but in practice, these amounts can be many times more. In general, in 2020, the exchange rates could not be more dependent on the actions of major players, who rule the ball. In normal, peaceful times, Central banks don't have to fight for every half percent of GDP, and the future of the economy isn't at stake. Thus, Central banks resort to currency interventions very rarely, because such actions are condemned on the world stage. All countries of the world are tied to each other through import-export operations and artificial undervaluation of any currency is good for some but bad for others. Those who feel bad will not sit and be silent, will influence the exchange rate of their currency, or impose sanctions, duties, and restrictions. Now, any Central Bank is fighting for its economy, so most likely, there are large-scale interventions. Thus, it is because of the global crisis, the deepest in the last 100 years, and the foreign exchange market is not trading quite "according to the rules".


Recommendations for the GBP/USD pair:

The pound/dollar pair continues to trade near its 2.5-year highs. Thus, the downward trend continues for the dollar. And since it persists, it is recommended to trade the pound/dollar pair further on the increase, until there are specific technical signals about the end of the uptrend. We have been waiting for its completion for a long time, but for the reasons listed above, the dollar's decline can continue for as long as you want.

The material has been provided by InstaForex Company -