Economics, Futures, FX

Uncovering the needle in the $2 trillion stimulus package haystack

2 trillion stimulus package haystack

In the information overload age that we live in, it is simple to get overwhelmed with the widespread propagation of headlines. Moreover, in the midst of the coronavirus pandemic, the spectrum of storylines make it hard to hone in on the relevant news you need for your trades.

When the U.S. Senate approved the seismic stimulus package for the President to sign, there was tremendous speculation regarding its implications on various facets of the economy.

2 trillion stimulus package haystack

News agencies were quick in their coverage of how the large-scale injection of capital would positively aid American workers and small businesses, as well as other industries in the economy. This same level of coverage, however, was notably absent regarding the impact on any market. Upon hearing the news, savvy traders would have been able to piece together the fact that a) the requisite signing of the package into effect by President Trump was, for all intents and purposes, a formality and b) the immediate impact of the package on U.S. currency would be a decline.

From the graphic, it is evident that the value of the U.S. Dollar receded sharply following the announcement of the stimulus package. Traders, who hypothetically jumped on the currency on March 9th or 10th,  looking to act upon news that the package was signed would weigh the short-term benefit of cashing in versus the long-term benefit of staying the course.

The drastic decline in the value of the currency shortly after the announcement of the package rendered any decision a trader would make as a loss relative to their holdings just hours prior. Also, with the abundance of news, storylines, and information arising from the coronavirus pandemic, many traders may have been focusing their attention on other markets’ news (like currency news from other countries and oil disputes between Saudi Arabia and Russia) or other coronavirus headlines, thus losing track of the information they would value.

Additionally, tracking specific storylines is tiring and is easy to get distracted from, and not all traders may have experience using social media platforms to find relevant headlines. In an ideal world, they would be able to ascertain that eventuality of the stimulus package multiple days in advance, and as a result, they could realize gains before the stimulus package forces the value of the dollar down. However, given the litany of storylines from coronavirus, that is a large undertaking alone. But luckily, you are not alone.

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