Gridlocked Washington and covid risks to weigh on risk appetite

As the US passes 25m covid cases, there are signs of gridlock in Washington.

The COVID-19 pandemic has killed more than 417,000 Americans, thrown millions out of work and is infecting more than 175,000 Americans per day, posing an immediate crisis to the Biden administration. 

One of President Joe Biden’s top economic aides on Sunday will press Democratic and Republican senators for a fresh $1.9 trillion in coronavirus relief to help struggling Americans and avert a larger economic crisis.

However, while Congress has already authorized $4 trillion to respond, a slimly lead majority in the House and Senate may not be enough to get bipartisan support to clear procedural hurdles without reconciliation, which allows major legislation to pass the Senate on a simple majority.

Senator Mitt Romney, who is a moderate Republican, for instance, has said he would listen to what the White House had to say, “but the total figure is pretty shocking.” 

A number of others from the GOP have also balked at the number.

Market implications

As set out in this week's S&P 500 Index article, there are concerns over not just the politics but also the spread and variants. 

Combined with the US politics and inflammatory headlines such as the US entry ban on non US travellers from the UK, it could make for a risk-off play which puts a focus on high beta forex pairs, such as AUD/JPY for the open and the days ahead.

The Chart of the Week: AUD/JPY bears step up to challenge the bulls at key resistance