The US Senate finally reached a deal on the USD 2 trillion US coronavirus stimulus bill. The package was confirmed early Wednesday morning by Legislative Affairs Director, Eric Ueland.
The coronavirus stimulus bill caused a great debate between the Republicans and Democrats last Sunday. There was hope that a decision would happen on Monday, but at last, the US government reached a bipartisan compromise. Here we examine precisely what the coronavirus stimulus bill entails and its effects on currency markets.
What is the coronavirus stimulus bill, and what does it involve?
The stimulus package aims to provide relief to businesses directly impacted by the coronavirus. The USD 2 trillion deal is by far the most substantial stimulus rescue package in US history.
US Senator, Mitch McConnell stated that the package is a “wartime level of investment into our nation”. At the same time, Senate Minority Leader Chuck Schumer declared that “this is not a moment of celebration but one of necessity.”
It was hopeful that an agreement on the stimulus package would take place last Monday. The Democrats, however, were not satisfied with a number of aspects of the bill. Their main point of contention was they believed the package did not adequately protect workers, families and healthcare providers.
Objections from the left caused the bill to be blocked twice, much to the frustration of Republicans. The US Senate leaders were eager for the coronavirus bill to be passed quickly. The aim was to provide aid to the US economy, battered by the coronavirus.
Each side engaged in round the clock negotiations. The constant discussions meant that the Senate was able to iron out the finer details of the rescue package. The bill is now to go to US President Donald Trump, who is due to approve this.
The stimulus package looks to provide individual adults with USD 1,200, USD 2,400 for married couples and USD 500 for adults. The allowance, however, may vary depending on household income. The bill is also said to expand on employment insurance.
Small businesses are due to receive USD 367 billion. The aim is for employers to cover employees who have to stay at home due to the coronavirus crisis.
The future of airlines is also a particular priority for the US Senate. USD 50 billion is due to go towards airlines, USD 8 billion for cargo airlines and USD 17 billion for companies central to national security.
There are several other industries said to be prioritised by Trump, which the stimulus bill also covers. These companies include cruise ships, hotels and restaurants.
The full text of the bill, outlining the specifics of the deal is due to be released later today.
How has this affected the currency markets?
News of the coronavirus stimulus package has undoubtedly created a boost in the currency markets. The struggling pound has seen a rise since the announcement.
Last week saw GBP/EUR reach a low of 1.056. Since news of the stimulus package, this has crept up to 1.0932.
The pound has also risen against the US dollar since last week. Previously we saw an exchange rate of 1.1414, but this has since increased to 1.1826.
The passing of the stimulus bill seems to have created an uplift and a sense of optimism for currency markets. As the specifics of the bill become apparent over the coming days, we are yet to see exactly how the package will impact the US economy.
Time will tell just how effective this will be for currency markets in the long term.
How has the coronavirus stimulus bill affected oil prices?
Oil prices have also been on the rise since the stimulus bill announcement. With the US being the most significant oil-consuming country, it is hopeful that there will be a rise in oil demands.
Brent Crude has seen an increase of 2.56% while West Texas Intermediate is 3.54% up.
The rise is significant given the fact that oil prices hit their lowest levels in 17 years last week.
Saudi Arabia and Russia are due to increase production from next month, which should cater to the rise in demand.
What does the coronavirus stimulus bill mean for businesses?
The stimulus bill is potentially an essential lifeline for American businesses. Every country is in a position where companies are having too close due to coronavirus. Therefore, these allocated funds will be crucial in this time of crisis. Companies will be able to pay an allowance to their employees during a time where they are unable to work.
The stimulus package also covers Americans who have recently been made unemployed due to coronavirus. The aim is for the government to reimburse their salaries to help pay their bills, which is undoubtedly a significant help.
Mitch McConnell stated that the bill would stabilise key industrial sectors by allocating funds to hospitals and other healthcare providers. The funds aim to help those who were struggling to gain access to vital equipment.
The future of US coronavirus plans
US President, Donald Trump has stated that he is going to review the lockdown situation in the US. He appears to be becoming frustrated with current coronavirus protocols. A recent Tweet read “we cannot let the cure be worse than the problem itself. At the end of the 15 days, we will make a decision as to which way we want to go.”