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Euro made a feast on the bones! EUR / USD is growing despite the difficult epidemiological situation and the deepest recession the euro zone


While Rome burns, not only Rome, US stock indexes had a feast on the bones. Vzbodrenny scale monetary and fiscal stimuli S & P 500 soared to 20% of the March bottom level and pulled up for an EUR / USD. Since I announced a few days ago to break the resistance at 1,084 pair rose by 2.5 figures, and whether there will be! "Bulls" are full of optimism, seriously counting on the fact that the fashion for the dollar as the main asset of refuge in the past. Do a little early?  



If discourage the desire to buy shares, the stock index reaction to the growth of the indicator to a historic high of 3.28 million on the eve of the release of data on applications for unemployment benefits in the US investors were concerns that the depressing statistics showed that the "bulls" is not stopped. Yes, all bad. Yes, the previous delivered in 1982 surpassed the record by almost 5 times. Yes, the US is likely to be in recession, which does not hide even Jerome Powell. But the turning point "bear" market the S & P 500, as a rule, occurred well before the end of the recession. I do and now it is time to buy stocks? 

Rise US stocks did not rally the sole cause of EUR / USD. The unprecedented monetary stimulus from the Federal Reserve led to the fact that the central bank's balance sheet for the first time in its history exceeded $ 5 trillion. For the week to March 25, it increased by $ 586 million, at $ 5.25 trillion. The advanced dynamics of the American figure on the European post-crisis times in 2009-2011 are a powerful driver of the rally of the main currency pairs.


Dynamics of the Fed's balance sheet


Source: Bloomberg.


Support for the euro has had a decision by the ECB to change the rules of the game. If earlier in the QE he should not have to buy more than 33% of the total debt of the issuing country, the coronavirus gave regulator powers to use selective focus. The most affected by the epidemic state unleashing wallets, and if you do not reduce the cost of maintenance obligations issued by them, will increase the likelihood of a new debt crisis in the eurozone. Solution Christine Lagarde and her colleagues had a favorable effect on the yield of bonds of the Old World and is an additional trump card in the hands of "bulls" on the major currency pairs.


Dynamics of European bond yields

Source: Bloomberg.

Cheap liquidity from the ECB, the European Central Bank agreement with the Federal Reserve on the mutual exchange of payment flows, as well as the decline in demand for the dollar as the main asset of refuge contributed to the growth of 3-month cross-currency swaps for EUR / USD to a record high. Interest in euro terms the excess liquidity from the Fed now higher than in greenbacks, so is it any wonder his rise to $ 1.1085?

The dynamics of cross-currency swaps for EUR / USD


Source: Bloomberg.

Frankly, I do not like this feast on the bones. "Bear" market S & P 500 is often replete with ups and downs, and the United States takes the lead in the number infected with coronavirus can cause investors to doubt that the current recession - it's painful, but not for long. It is likely the pair EUR / USD will soon begin to draw the consolidation of the current levels, or by 1,1155-1,1175.


Source analyst LiteForex


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