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Dollar terrifies! While coronavirus is not brought under control, the financial markets will continue to dance to his tune


Donald Trump, from time to time caught on trying to wishful thinking, his goals seemed too ambitious and controversial decisions, but today he has to be realistic. It would not have wanted the US President to stock indices continued to reduce losses, he had to tell the truth. America's fallen on hard times. A few weeks, and especially a few days from now are going to be terrible. Such rhetoric could not scare investors. S & P 500 dipped about 4%, and following it in the opposite direction dollar resumed offensive.



Nightmare the first quarter of 2020 went into history. Tablecloth was dear to him, but not the fact that in April, the situation will change for the better. There is no evidence that the coronavirus is under control, the financial markets continue to dance to his tune. yield Treasuries Fall eloquently hints where in conditions of increased demand for safe-haven assets, most likely, will US stocks. Given the growing inverse correlation to the eyes of S & P 500 index USD, the chances of implementing the theory of "dollar smile" look very high. 

Dynamics of S & P 500 index and USD


Source: Trading Economics.

When the US president warns that we must prepare for the worst, the White House afraid of their predictions about the death of the coronavirus in the 100-240 thousand people, and Nordea Markets calculations show that at current growth rates, the number of infected people in the United States as early as mid-April, will exceed 1 million, deter employers from plant closures and mass layoffs is very difficult. During the week of March 21 to the number of applications for unemployment benefits reached a new historical high of 3.3 million, and, according to a Reuters poll, on the basis of the following 7-day's rest may rise to 3.5 million. If such dynamics will take place throughout 4 -5 consecutive weeks, a large-scale stimulus may not be enough. No wonder Donald Trump intends to expand it. According to the president of the United States, 


Dynamics of the number of people infected by a coronavirus


Source: Nordea Markets.

The uncertainty surrounding the epidemic and increase the probability of a U-shaped recovery in the US economy cools the ardor of wanting to buy pretty depreciating US stocks. It does not help S & P 500 and better-than-expected macroeconomic data in the States. Business activity in the manufacturing sector from the ISM slipped modestly in March, from 50.1 to 49.1, and from the ADP employment reduction in the private sector amounted to 27 thousand in the estimates of 125 thousand. Everyone understands that the worst is yet to come. The bottom is reached, and after that happens, the recovery will be slow and long. 

Thus, the main driver of change in the dollar remains the dynamics of US stock indices. Continued peak of S & P 500 fail EUR / USD to the dangerous support at 1.087 and 1.084, for which you may asunder abyss. In the meantime, the "bulls" by all means cling to the lower boundary of the range of short-term consolidation of 1,092-1,117.


Source analyst LiteForex


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