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Main » 2020 » March » 10 » Dollar save yourself! Something that did not happen at the Fed can make Donald Trump
Dollar save yourself! Something that did not happen at the Fed can make Donald Trump


Salvation drowning - the handiwork of drowning. The fastest one-day collapse coming in the wake of the oil the US stock indexes since the global financial crisis and the panic over the impact on the US economy coronavirus can be Donald Trump presidency. The White House is well aware of and announce the application of large-scale fiscal stimulus. That it will - support for people temporarily deprived of work or reduction of taxes paid from wages, we will soon find out. In the meantime, we should recognize that Trump's stunt was a success: the US stock market has grown up and was able to stay on the territory of the "bulls". Till. 



Oil is traditionally perceived as a status indicator of the health of the global economy, so its collapse was another proof of the grim picture and worsening investor sentiment. Not the fact that the low quotations of Brent and WTI will help the global GDP, as the gap in terms of supply chains and reduce the demand for traditional communication may not work. US stock indexes reacted to run between Saudi Arabia and the Russian cat rapid Closeouts: S & P 500 at the auction 9 March lost 7.6%, the Dow Jones had previously hardly began at 2000 points per session, and the first in 23 years, suspension of trading more reminded of 2008 situation. It should be noted that the US stock market falls much faster than its global peers, which is one of the factors weakening greenback.


Dynamics of the US and world stock markets


Source: Bloomberg.


The parallels with the global economic crisis are everywhere, and from the central banks are waiting for co-ordinated action in the field of monetary expansion, which they tried to stop the sale of nearly a dozen years ago in the financial markets. The problem is that many are not able to give what are waiting for investors. Unlike the Fed, the ECB did not raise rates after 2008-2009, and, on the contrary, they are reduced. Arsenal ammunition is limited, and if Christine Lagarde will ease monetary policy on March 12, he will become even more scarce. This fact, coupled with far inexhaustible potential Fed monetary expansion is a key driver of the rally EUR / USD. The yield on US bonds drops significantly faster than their German counterparts, betting spread on 10-year debt fell to their lowest level since 2015


Dynamics of differential yields on US and German bonds


Source: Bloomberg.


Thus, the fact that the Fed failed by reducing the federal funds rate by 50 basis points at an extraordinary meeting, it turned out to make Donald Trump. In my opinion, the US president has chosen a good time for the announcement of fiscal stimulus: the basic movement of oil down already passed, and the stabilization of Brent and WTI will calm and the US stock market. EUR / USD is at arm's length came to the previously designated support at 1,133, and if at its March meeting, the ECB will act aggressively, we can wait for the real roller coaster. The more interesting! \


Source analyst LiteForex


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