Late last night, the Republican senators published their proposal for the next stimulus bill, which includes an extension of the higher unemployment benefits but at a lower level (an additional USD200 per week versus USD600 per week currently) through September.

From October and onwards the Republicans propose a new system compensating workers for up to USD500, which combined with the regular state unemployment benefit may compensate as much 70% of the lost wage (up to a state cap). The proposal also includes another round of direct payments to Americans (USD1,200 per qualified American, USD2,400 for married couples and USD500 per dependent) and enhanced employee hiring and retention payroll tax credit (more details here).

The proposal is unlikely to fly with the Democratic Party, who demands a much bigger package including an extension of the current USD600 per week, which is set to expire this week. For this reason, we expect the negotiations to drag on until mid-August.

EUR/USD continued its recent climb yesterday pushing above 1.17. We continue to see upside in the cross although our 1M forecast has already been reached; look for 1.1815 (Sep-18 high). See FX Essentials for our short-term views across FX crosses. On top of concerns about US growth, virus development and tensions with China, the tailwind for EUR/USD is the result of better news out of the euro area.

Stock markets made further gains yesterday in the US, again lifted by tech stocks. Positive news on the vaccine front is also underpinning share prices as both Moderna and Pfizer launched phase-3 trials on Monday, which could pave the way for a vaccine already by year-end. The latest virus numbers point to stabilisation in the US, while more countries in Europe and Asia are challenged by new outbreaks, see COVID-19 Update – US seems to be peaking while more countries have started ‘dancing’ with COVID-19, 27 July.