President Joe Biden has announced that he may be considering a federal gas tax holiday to ease inflationary pressures on the U.S. consumer. This looser fiscal policy could aid in the tight monetary policy stance and afford the Federal Reserve greater optionality and flexibility in its battle against inflation. Theoretically, loose fiscal policy attracts more foreign investment and therefore a higher demand for dollars. Coupled with a hawkish central bank, this may give an additional boost to the greenback if the tax cut is approved.
This does not bode well for the euro however, European Central Bank (ECB) President Christine Lagarde managed to ease fears via her statement yesterday around its proactive fight against fragmentation.
Price action on the daily EUR/USD chart above shows a strong start to the European session for bulls who currently test the 20-day EMA resistance level.