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Main » 2020 » March » 11 » Dollar puts the stimulus! Hopes for lower taxes have supported US stocks and "bears" on EUR / USD
Dollar puts the stimulus! Hopes for lower taxes have supported US stocks and "bears" on EUR / USD


The fastest sales Treasuries over the past 3 years, have lifted bond yields around the world, and 5% of th Rally US stock indexes cooled the ardor of the "bulls" on EUR / USD. Improved global risk appetite has been made possible thanks to hopes for a fiscal stimulus. The White House intends to push through Congress a project to reduce the deductions from the salary fund, Italy is set to expand the scale of support for the victims of the coronavirus to more than € 10 billion, the EU finance ministers are considering the creation of € 25 billion special investment fund, Japan announced the use of the supplementary budget, Australia and stands on the threshold of tax cuts and increased government spending. However, while flattered early. Internal opposition from Trump is stronger than its international counterparts. 



Dynamics of yields on US Treasury bonds


Source: Bloomberg.

all means are good to win. Under the guise of a coronavirus, the White House is going to throw a bone constituents in the form of temporary reduction of wages paid taxes until 31 December. Say, celebrate election victory - extended no - lose your preferences. However, for the start of the project it is necessary to push through Congress, but this seems unlikely in view of the fact that the House of Representatives controlled by Democrats. They do not understand why the rescue of those who does not need it? Is not it easier to offer targeted assistance, which will cost the economy much less than the $ 300 billion plan for Donald Trump?

Yes, because of the epidemic of rating agency Moody 's lowered the outlook on US GDP for 2020 from 1.7% to 1.5%, but the president's chief economic adviser Larry Kudlou reasonably he said that it is not known how it will impact on the US coronavirus economy. So far, it looks insignificant. Personally, I would not be surprised that in the near future on the US macro statistics will present a pleasant surprise: a pandemic threat frightened consumers increase purchases. According to Redbook Research, sales in stores at the end of the first week of March increased by 6% y / y. 


sales growth in stores


Source: Bloomberg.

Despite the fact that investors do not feed bread - Give to draw analogies with the global financial crisis of 2008, of BlackRock notes that currently there are significant differences between the events 12 years ago. The US economy is firmly on its feet, and the financial system is more secure than it was then. As a result, there is a great opportunity to buy something cheap. This, of course, is about US actions, behavior - the key to the future dynamics of EUR / USD. 

Let Donald Trump renewed criticism of the Fed, arguing that the pathetic and slow-moving central bank is obliged to reduce its rates to the United States its main competitors, the futures market is no longer expects to reduce borrowing costs by 75 bp on the FOMC meeting on 17-18 March. In the best case - 50 bp Before the "bears" for the euro loomed hope to develop a counter-attack in case of a breakthrough supports at $ 1,133 and $ 1.1280. However, first you must wait for the verdict of the ECB.


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