The pandemic inflicted a lot of damage on the US economy, but thankfully, the worst has passed. It turns out that when Congress and the Federal Reserve join forces to fight a crisis, the stimulus response is so overwhelming that it eclipses everything else. Take a look below for a bird’s-eye view of the US economy and the reserve currency in 10 charts.
Vaccination program running like a well-oiled machine
Businesses struggling to find workers again
Consumers have been loading up on savings amid lockdowns
Stimulus checks and pent-up demand to turbocharge consumption?
Supply chain disruptions, energy prices, and stimulus set to boost prices
Dichotomy between Fed and investors about rate increases
Expectations for rate hikes have reawakened the dollar
FX is all about rate differentials between economies
Budget deficit has exploded thanks to stimulus packages
To ease the debt burden, Biden wants to raise corporate taxes
All told, there’s still a long way to go in this recovery, but America is healing its economic wounds quickly thanks to the overload of federal spending and the lightning-fast vaccination program. At this rate, it seems like the Fed will be forced to change tune on interest rate increases before long, like the Bank of Canada did lately.
This implies a rosy outlook for the dollar, in particular against the likes of the euro and yen, as both the European Central Bank and the Bank of Japan will likely be among the last major central banks to raise rates again. Therefore, the wind in interest rate differentials could continue to blow in America’s favor, lifting the dollar in the process.