USD fell as the Democrats’ chances of advancing in the run-off increase

Mohammed Abdelkhalik
January 6, 2021

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USD Outlook: 7th January 2021

The USD fell on Wednesday morning against most of the major currencies, with the increasing chances of the Democrats’ progress in the run-off elections for the Senate in Georgia, which will pave the way for the Biden administration to take broad stimulus measures.

The USD index fell for the third day in a row by 0.20% to trade at 89.70 points, the lowest since April 2018, as traders await the result of the runoff election in Georgia, and over the past year, the index lost more than 9%.

Democrat Warnock won a seat and votes were still being counted for the second seat, the sweep of the Democrats would have an easier way for Joe Biden to move forward with his political agenda to reverse Trump’s tax cuts, higher wages, and tighter regulation.

USD decline before Senate elections in Georgia

Georgia residents voted yesterday to elect two senators, and this election is the most important for the Senate for a long time because it will determine the composition of the Senate, and will determine the overall performance of Joe Biden, the next president.

Chart of EURUSDD - 7th January 2021

A Democratic side victory in the House would give Joe Biden the majority he needs to accomplish his agenda, and this includes increased taxes on corporations, the wealthy, and more liberal judges, more stimulus, and more regulation. Analysts say that while a potential Democrat victory could raise concerns about more regulation. Therefore, this may exceed expectations of greater fiscal stimulus, thus keeping risky assets supported and the dollar weak in the coming months.

Final results have yet to be announced, but preliminary data indicates that the Democratic Party has won one seat and is likely to secure both seats, and this would lead to a 50-50 tie in the Senate and control of the Democrats through a vote by Vice President Harris.

Meanwhile, the dollar index is also declining, despite relatively strong economic numbers from the United States. In yesterday’s report, Markit said that the US manufacturing sector continued to perform well last month, as the PMI rose to 57.1 from 56.5 in the month. Previous, improved data comes even as the country continues to deal with increasing cases of coronavirus.


Author Mohammed Abdelkhalik

Professional Trader and Analyst, economist in Financial and Forex market since 2004.holds an MBA from the American University in Egypt. Mohammed works as an economic writer and technical & fundamental analyst for many international Forex and financial trading companies in both English and Arabic on a daily basis.