Biden's bill package met opposition from Democratic senators, holding back the dollar's rally. In addition, concerns regarding Omicron are still an issue.
The US dollar's weakness was limited as it was pressured by the uncertainty regarding the Biden bill that sparked political turmoil in the US. At the time this news was written on Tuesday morning (21/December), the Dollar Index (DXY) was trading at around 96.51, failed to continue the significant strengthening that formed last weekend.
Political Chaos Presses US Bond Yields,
Senator Joe Manchin said he would not support the Biden administration's $1.75 trillion domestic investment bill package. In fact, Manchin's position has been considered a key figure for President Biden to pass a bill that aims to boost the investment sector. Manchin's actions immediately received a sharp rebuke from the White House, thus sparking new uncertainty.
Goldman Sachs lowered its first-quarter 2022 US GDP forecast from 3 percent to 2 percent, and cut its 2022 second-quarter GDP outlook from 3.5 percent to 3 percent. However, this projection is made without taking into account Biden's bill known as Build Back Better.
Omicron Variant Still Spreading Threats
In addition to the ongoing uncertainty in the US, the dollar's position was also affected by concerns about the Omicron COVID-19 which is spreading very quickly in the European region. The Netherlands has imposed restrictions and Italy is also reportedly considering implementing a similar policy. In fact, a number of Asian countries confirmed an increase in cases of the Omicron variant in recent days.
"I think the dollar's current movement is getting carried away in the run-up to the new year… With concerns over Omicron rising, the stock market is weakening (so) people are preferring to liquidate their positions," said Kathy Lien, managing director at BK Asset Management.
Lee Hardman, currency analyst at MUFG also shared the same opinion. Hardman said, "Investor risk sentiment has been undermined by continued evidence of the massive spread of the Omicron variant." No doubt, this condition also suppressed the movement of commodity currencies in trading early last week.
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