A divided government is very likely

Tom Barkin, Chairman and CEO of the Richmond Federal Reserve, says spending is coming back faster than employment.

Additional conclusions

“The recent escalation in cases makes me believe that we still have a long way to go.”

“It seems very likely that there is a divided government.”

“Maybe there is a smaller specific stimulus, but you may see a revision of fiscal prudence in the coming months.”

“Monetary policy will remain flexible until we see the economy recover.”

“There is still a lot of money in people’s pockets that will cushion the fall in fiscal aid.”

Market implications

The previous meeting of the Federal Reserve has little consequence for the currency space, as the concentration occurred elsewhere with the US elections.

The upcoming Federal Reserve meeting will be pivotal for markets considering the elusive fiscal stimulus package and we could see a shift in QE very soon.

“Powell’s focus on COVID and more needs for fiscal stimulus highlights part of the tactical concern of chasing a weaker USD from current levels,” explained analysts at TD Securities.

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