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The dollar will choose a different letter! Without a rapid recovery in the global economy, the dollar will continue to be popular


Can the US economy become great again in 2021, according to Steve Mnuchin? Investors should not care about the answer to this question, but about the faith of financial markets in the words of the Minister of Finance. Judging by the fall of the S&P 500, shares are guided by the principle of "trust, but verify." The number of applications for unemployment benefits in the week of May 16 amounted to 2.4 million, the figure is constantly falling from its peak value of almost 7 million at the end of March, while the number of Americans receiving benefits increased from 22.5 million to 25.1 million per week. Business activity has gone from the bottom of April, but continues to be depressed, and people counting on a V-shaped recovery of the US economy, it seems, will have to look into the alphabet and look for another letter. 




The dynamics of applications for unemployment benefits in the United States


Source: Bloomberg.


The situation in the eurozone looks no better. According to Markit, the composite PMI grew from 13.6 to 30.5 in May, however, jobs continue to decline at an unprecedented rate, even despite all the efforts of governments to maintain them. April was a failure for purchasing managers' indices, but fears over the coronavirus will continue to stifle consumer activity, and lower demand forces employers to lay off employees. It will take years to recover, with Capital Economics predicting that in the second quarter, the GDP of the foreign exchange bloc will drop by 20%.


Dynamics of business activity


Source: Wall Street Journal.

Слабость экономик США и еврозоны препятствует продвижению вверх фондовых индексов и усиливает спрос на активы-убежища. Спрос на гринбэк поддерживается неопределенностью вокруг взаимоотношений Вашингтона и Пекина и нежеланием последнего обозначать цель по приросту ВВП в 2020. Впервые за более чем четверть века Поднебесная решила не ставить таргет, что сигнализирует о ее нежелании активно расширять фискальный и монетарный стимул для достижения экономикой хотя бы 5,5%-го прироста в текущем году. По мнению экспертов Wall Street Journal, именно эта цифра нужна, для того, чтобы удвоить ВВП в течение 10 лет. 

The lack of additional large-scale incentives from Beijing is bad news for the export-oriented economy of the eurozone and for the euro. However, until the end of 2020 there is still a lot of time, and the position of the Celestial Empire may change. As, however, is the situation around US-Chinese relations. The chief economic adviser to US President Larry Kudlow claims that the agreement between Washington and Beijing in the field of trade, reached at the end of January, has not undergone any changes, but the Celestial Empire must be punished for a pandemic. Donald Trump shot another arrow in the direction of Asia, saying that if China introduced legislation restricting rights and freedoms in Hong Kong, the United States would respond harshly. 


In my opinion, without a vaccine from COVID-19, which will allow you to count on a rapid recovery in global GDP, reduce the share of the US dollar in investment portfolios and expect EUR / USD to go beyond the medium-term trading range of 1,065-1,115.


Forex analytics and forecast today LiteForex Demidenko Dmitry


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