Bank of America Global Research maintains a bullish USD bias over the medium-term.
"Major US fiscal policy stimulus is another plus for the USD. In addition to the $900bn that the last administration agreed during the holidays, the Biden administration is now proposing $1.9tn, with even more latter in the year for infrastructure. Even if the plan weakens during the negotiations, the starting point is substantial. It would bring total fiscal stimulus in the US to about 15% of GDP, equal to fiscal stimulus last year and three times more than the EU Recovery Fund," BofA notes.
"Fiscal policy in the meantime in the EU is not as supportive and if anything could be tightened too early. In addition to the EU Recovery Fund being only one third of the US fiscal stimulus on the table, it will be spent during a 7-year period, with most of it in 2023-24, according to our estimates," BofA adds.