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Main » 2020 » February » 4 » Dollar back to the classics. The US currency is widely used as a safe haven
Dollar back to the classics. The US currency is widely used as a safe haven


In contrast, trade wars, coronavirus markets returned to the classic risk aversion. If in 2018-2019 from time to time could be observed illogical at first glance, a synchronous dynamic profitable and reliable assets, in 2020 the markets move as written in the textbooks. The increased demand for Treasuries leads to a drop in their profitability, correction of stock indices and strengthening greenback. Investors believe that the epidemic will have an impact not only on the world, but also in the US economy. This new year is different from previous ones: when people believed that the United States will benefit from the trade wars and simultaneously bought and the dollar and the S & P 500.



According to estimates Goldman Sachs, if you manage to win over the coronavirus win in February and March, the global GDP will lose 0.1-0.2 ppt and noted a modest acceleration of growth from 3.1% to 3.25%. The bank predicts that the volume of production in the US fell by 0.4 pp in the first quarter. Bloomberg believes that the greatest harm among the European countries, the epidemic will bring the Netherlands, and popular publications, experts have lowered the consensus forecast for China economic growth in January-March to 4.9%. 


Coronavirus impact on the GDP of the euro area



Source: Bloomberg.


Thus, the coronavirus not leave anyone unattended and Beijing even going to ask States to postpone the implementation of their commitments to increase purchases of US agricultural products in 2020 to $ 76.7 billion compared to 2017. They say in the trade agreement refers to natural disasters or other unforeseen circumstances, which will not allow China to begin to perform terms of the contract in mid-February. 


If in 2018-2019 because of the trade wars Shanghai Composite fell often, and the S & P 500 grew, the coronavirus caused both indices going south. The Chinese stock market dropped by more than 7%, which happened only eight times in its history. capitalization of losses amounted to a record $ 720 billion. 


The dynamics of the market capitalization of the Chinese stock



Source: Bloomberg.


At the same time, US stock indexes fell and the dollar has grown, serving as a safe-haven currency. Only the publication of strong business activity statistics in the US manufacturing sector from the ISM changed the situation. Purchasing Managers' Index for the first time since July, rose above the critical mark of 50, checking out the best monthly gain since mid 2013. Investors returned to the stock, and the greenback lost some of their achievements. 


His reaction to macroeconomic data once again confirms how much the market is nervous because of the uncertainty around the coronavirus. In my opinion, in early February had an effect of deferred sales: the Chinese just came out of the holidays, and large-scale Shanghai Composite peak seems logical. Index pulled a down its counterparts in Europe and the US, but in the next few days the situation is likely to stabilize. I expect an adequate reaction of the EUR / USD data releases on US business activity in the non-manufacturing sector and the labor market. For resumption of the rally "bulls" will require steady assault on the resistance 1,1095-1,1105.


Analyst forecasts and forex  Liteforex


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