Home » 2020 » April » 3 » Is it time to give up on the euro? "Bears" on EUR / USD advancing, but not all are confident in their victory
Is it time to give up on the euro? "Bears" on EUR / USD advancing, but not all are confident in their victory
A pandemic would cost the world economy $ 4.1 trillion, equivalent to 5% of GDP. These figures are announced in the forecasts the Asian Development Bank, which is still in early March said about $ 347 billion. Since then, the epicenter of the epidemic has shifted from China to Europe and the United States, and the number of infected with coronavirus has exceeded 1 million. The infection spreads so fast that investors plagued by vague question: will there be enough provided by the Federal Reserve and other world tsentrobankmi liquidity to calm financial markets? Judging by the resumption of the rally USD index, the majority sees the answer to this question is negative.
Fears about the fact that the peak of a pandemic has not yet been achieved, the rise in applications for unemployment benefits in the US and the sad statistics of Chinese business activity in the services sector have allowed the "bears" for EUR / USD to storm the support at 1,092. Opponents of greenbacks have not helped even the US stock indexes, Donald Trump impressed statement that Russia and Saudi Arabia will cut oil production by 10-15 million b / d. While all this fork in the water it is written, besides the president argues that the United States participate in the agreement will not, because it is contrary to US antitrust laws.
US jobless claims rose to a new record high of 6.6 million. In two weeks, an increase of 10 million, which is equivalent to 6% of the workforce. However, a special panic about labor market data released in March US investors do not have. Bloomberg Experts predict a decline in employment outside the agricultural sector by 100 thousand and increase in unemployment from 3.5% to 3.8%. Since statistics are collected in the first half of the month, the time has not yet come to be afraid of. We will have to wait until May 8, when the light will see the data for April. They can show 20 million job losses and a rise in unemployment to a new historic high.
Dynamics of employment outside the agricultural sector of the US
Markets rise or fall on expectations, so is under the sword of Damocles of a terrible makrostatistiki US S & P 500 chance of rapid growth a bit. Turbulence in the US stock market is likely to continue, that spreads the red carpet in front of fans greenbacks. support breakthrough in 1,0825-1,084 increase the risk of continuing the peak of EUR / USD to 1,075.
Despite the fact that the ranks of the supporters of the theory of "dollar smile" are growing by leaps and bounds, not all believe that the euro has thrown the white flag. Nordea Markets claims that couple EUR / USD has more chances to go to 1.2, they fall to the parity. First Fed's balance sheet is growing at a record pace; Second, the Fed easing monetary policy has reduced the value of investments in hedge dollar-denominated assets, which is a "bullish" factor for the euro; Finally, thirdly, the lower the pair falls, the greater the chance to see the coordinated intervention of the G7 countries in Forex life with the aim of weakening greenback.
Dynamics of the Fed's balance sheet
Source: Nordea Markets.
The dynamics of EUR / USD and the cost of hedging
Source: Nordea Markets.
Who is right, time will tell. In the meantime, investors are preparing for the release of data on the US labor market in March.