It has now been over four months since Joe Biden assumed the office of President of the United States of America. His first few weeks were marked by a flurry of executive orders, but since then what have been his major policy decisions and what effect have they had on the currency markets?
Mr Biden made it clear from the very start of his presidential campaign that his administration would seek to overturn many, if not all, of the policies brought in by his predecessor Donald Trump. And so it came to pass. Even in his first day in office, Biden signed 17 executive orders aimed at erasing Trump’s legacy, including a promise for the US to re-join the Paris Climate Agreement, axing the construction of the Keystone pipeline, and removing many travel restrictions and immigration barriers.
After this initial flurry of executive orders, Mr Biden was forced to hit the ground running to deal with the Covid-19 pandemic. To that end, he made a pledge to deliver 100 million vaccines by his 100th day in office. In the event, Mr Biden had overseen the delivery of the promised 100 million shots by his 58th day in office, and so he doubled his target to 200 million. As it stands, over 170 million American have received at least one dose, although uptake numbers are now slowing.
Vaccines aside, the other key facet of Joe Biden’s first four months has been the unprecedented levels of monetary stimulus pumped into the economy. One of his first packages was the $1.9 trillion so-called American Rescue Plan, which aimed to give $1,400 to every eligible adult, as well as pump money into a variety of benefits programmes. To date, there have now been three ‘stimulus checks’ paid directly to Americans, with a possible fourth on the way.
At the same time, an infrastructure spending plan worth several trillion Dollars more has been put on the table. However, the bill has hit a wall, with Republican Senators refusing to ratify it unless it is watered down. Other stimulus measures aimed at helping the economy recover from Covid-19 related shutdowns are going ahead, with a crackdown on corporate tax dodging at least partially offsetting the cost.
Once in office, Mr Biden wasted no time making it known that the US would be resuming a firmer stance towards Russia and China. In fact, having recently arrived in the UK to attend the G7 summit, Biden made it clear that the US would be more active on the world stage under his leadership, issuing a stark warning to Russian leader Vladimir Putin in an op-ed saying “We are standing united to address Russia’s challenges to European security, starting with its aggression in Ukraine.”
In a similar way, the Biden administration has stoked tensions with China over the past months. Following four years of Trump’s trade-war with China, Biden had been expected to offer something of a rapprochement towards the Asian giant, however nothing of the sort has occurred. Instead, there have been calls to investigate the origin of the coronavirus outbreak, with the finger of blame being pointed at a Wuhan lab as the possible source. China has vehemently denied this and is refusing to give the US access to the virology lab in question.
There has been criticism of Britain, too, with Mr Biden issuing a stern rebuke to UK PM Boris Johnson for ‘inflaming tensions’ in Northern Ireland due to the UK’s dealings with the EU over trade. Biden, who was critical of the UK vote to leave the EU, has Irish roots himself, leading to an uncomfortable standoff between London and Washington over the Northern Ireland Protocol.
Since Mr Biden took office, the US Dollar spent the first two months strengthening and the latter two weakening again, meaning it’s almost at the same level as it was in February. The reasons for this are twofold.
On the one hand, Biden’s sizeable stimulus programmes are thought to be behind a sudden rise in inflation. If inflation gets too high, the Federal Reserve will have no option but to try and stop the economy from overheating by raising interest rates. Just the prospect of a rise in interest rates – which have been bumping along at almost zero for a long time – caused a reversal in the US Dollar Index, which reached a peak sometime around the beginning of April. Ever since then, the US Dollar has been steadily weakening as the Greenback loses favour among investors.
At the same time, the accelerated rolling out of Covid-19 vaccines around the world have facilitated the reopening of national economies, causing currency traders to dump Dollars and invest in ‘riskier’ assets, such as the Australian Dollar. This has made the US Dollar weaker. Whether this weakening trend is set to continue could depend on how likely it is the Federal Reserve will raise interest rates.
One thing is for sure though, with so many global risk variables on the table, Mr Biden’s eventful first few months as president aren’t likely to get any easier as time goes by.
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