Are we just seeing a lull in financial stimulus right now?

[RobU2]

When lockdown started, central banks and governments were clear that they would need to do something to stimulate the economy. A period of a few months seemed politically acceptable. Now some of those measures have come to an end in the US, where we have seen generous unemployment cheques and the moratorium on evictions coming to an end, and reduced bond purchases by the Fed. And probably a number of those people responsible for those policies are currently on vacation, so they are not around to extend or renew the stimulus packages. Might we expect to see some dollar strengthening in the next couple of weeks due to the relative lack of stimulus? So far as gold is concerned it seems this has already been demonstrated. And then, when the effects of the ends of the initial stimulus measures start to become apparent, and policy makers come back from holiday, they will realise that something needs to be done (again). Especially for Trump, who has an election looming. So we then see a reintroduction of stimulus and a further weakening of the dollar? Just wondered what people's thoughts are.

Thanks.

 

[RobU2]

The Senate has just adjourned until 7th September, bless them.

 

[RobU2]

The fact that US-China trade talks are recommencing tomorrow could be a bit of a dent in my short-term dollar strength theory.

 

[RobU2]

The dollar index is significantly down since I wrote this. Still, the facts that the S&P is now back at its pre-crisis high (job done for the Fed?) and that China is buying a lot of US goods seem to be dollar positive so I'm not ready to let go of my thoughts on this.

 

[RobU2]

So the dollar index came up quite a bit since my last post, so I am looking more right.

I'm not hearing much talk of stimulus packages, even from the Fed in its July minutes. So I remain dollar bullish. But will stimulus be needed to support the banks soon? Surely the current events are outside all the stress testing that they have been doing over the past decade? They must have been hit hugely by corporate insolvencies and defaults on mortgages.

 

[RobU2]

Looks like any lull is over now...

 

[hatemypips]

When lockdown started, central banks and governments were clear that they would need to do something to stimulate the economy. A period of a few months seemed politically acceptable. Now some of those measures have come to an end in the US, where we have seen generous unemployment cheques and the moratorium on evictions coming to an end, and reduced bond purchases by the Fed. And probably a number of those people responsible for those policies are currently on vacation, so they are not around to extend or renew the stimulus packages. Might we expect to see some dollar strengthening in the next couple of weeks due to the relative lack of stimulus? So far as gold is concerned it seems this has already been demonstrated. And then, when the effects of the ends of the initial stimulus measures start to become apparent, and policy makers come back from holiday, they will realise that something needs to be done (again). Especially for Trump, who has an election looming. So we then see a reintroduction of stimulus and a further weakening of the dollar? Just wondered what people's thoughts are.

Thanks.

I think yes they are on the brink of introducing more stimulus considering recent Europe quite stringent measures. They smashed services sector again - a signal that avalanche of new government debt is coming

 

[hatemypips]

Rates are rising due to inflation expectations I think it's not a good time to announce more stimulus as debt servicing may cause concerns about long term credit status of the governments.