Locked Democrats in the Senate a project to help victims of coronavirus US economy, pessimistic forecasts for the US labor market and GDP, rumors of foreign exchange interventions, as well as the fact that by using swaps the Fed managed to muffle the increased demand for the dollar led the "bears" on EUR / USD retreat. Fuel to the fire poured German intention to unleash wallets. Berlin announced the creation of a supplementary budget by € 156 billion, and the anti-crisis fund to help victims of the epidemic of companies by € 500 billion.
In contrast to the quick decisions in Europe, States are experiencing problems with the approval of the proposed Donald Trump initiatives legislature. Almost $ 2 trillion stimulus package was supported by a 47th vote in the Senate of the required 60. The main stumbling block was the $ 500 billion package of assistance to victims of coronavirus corporations. Democrats have sounded the alarm, claiming that there are no guarantees that the money will not be used to repurchase shares of the Company.
The speed of decision-making on fiscal stimulus - a very important factor in the current environment. According to Blomberg Economics, if the eurozone governments will make a step forward, the recession will be deep but short-lived. If not, the euro can not survive the recession. The authoritative publication predicts subsidence GDP exchange unit by 3.1% in the first quarter and 2.4% q / q in the second.
of European GDP forecasts
Banks and reputable organization expect to see even more grim picture for the US economy. Goldman Sachs predicts 24% -e drawdown of US GDP in the second quarter year on year, JP Morgan and Oxford Economics -12% e, which is significantly higher than the -8.4% in October-December 2008. In spite of the hopes for recovery the third and fourth quarters, JP Morgan believes that the results of 2020 the gross domestic product will shrink by 1.8%, and in the spring the labor market will not be counted 7-8 million jobs. The growth in unemployment to 30% in April-June, warning and president of the Federal Reserve Bank of St. Louis James Bullard and interviewed Wall Street Journal, experts expect a rise in unemployment benefits in the week 20 March to a new record of 875 thousand. Previous 695 thousand was raised in October 1982.
Yes, with a fiscal stimulus States clearly tightened, however, the epidemiological situation in the Old World looks worse than the New. So far worse. In view of the fact that European legislation is much more tolerant than the US to persons departing to the hospital, many workers in the US are forced to go to work rather than stay at home. As a result, the number of infected people in the United States is growing faster than in other countries and they can overtake Italy and even China in the near future.
Add to that the decline in value of cross-currency swaps, which indicates that the Fed was able to cool the demand for dollars outside the United States, and rumors about the repetition of history with the Plaza Accord in 1985, when the G7 jointly sold the greenback, the EUR / USD correction seems logical . A successful assault on the resistance 1.075 strengthen retracement of the risks to 1,084.
Source analyst LiteForex
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