On Tuesday, the dollar further declined, expecting further steps to boost the economy by the prospective administration of Biden in the face of a worsening health situation. The dollar index (measuring its evolution versus the basket of six benchmark currencies) fell by 0.49% to 89.44 points, the lowest in three years, while the euro rose by 0.38% to $1.2295.
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On Tuesday, the financial markets were watching the election of two Georgian senators, a vote that will decide control of the Senate by the Republicans (currently in the majority) or the Democrats, who still control the House of Representatives.
The stakes are high, even if the Democrats won Georgia’s two seats, the Senate would be divided into 50/50 seats between the two parties and would turn to the Democratic camp easily, as it would then be up to the vice president (Democrat Kamala Harris) to cast a vote on the bill.
Such a condition will have significant repercussions for the capital markets, allowing Joe Biden more leeway to take left-wing action (tax increases, higher capital gains taxes, increased regulations, etc.). Markets are more worried that in 2017, Joe Biden has contested the sharp corporate tax cuts by Donald Trump, which will place pressure on U.S. corporate earnings and weigh on their stock prices. In the short term, though, in the face of the coronavirus pandemic, a ‘blue wave’ will mean expanded budget funding, a possibility which does not displease the markets.
Donald Trump and Joe Biden both flew to Georgia on Monday to support their candidates in a double Senate race, hoping to close on Tuesday with a very strong turnout.
Although investors remain confident that 2021 will be the year of economic growth and disease victory, they are worried about both the current acceleration and the slower-than-expected vaccination rate, especially in the United States.
