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The euro in search of compromise! United Europe in difficult times requires collective assistance


When there is no agreement on the way they will not do. 16-hour video-conference of finance ministers of the eurozone countries ended with no results, which did not allow the "bulls" for EUR / USD to continue to rally even amid rising US stock indexes. When one pulls the blanket over himself, and tries to prove that his country most affected by the coronavirus, rely on the collective support difficult. We have to be satisfied by internal resources, which leads to an increase in public debt to GDP and even more deeply and so drowns under water economy. 



The inability of government officials to negotiate back on the market rumors about a split of the currency bloc, which led to an increase in the yield of Italian bonds and the expansion of spreads rates on them with German counterparts. However, the debate about the use of € 500 billion fiscal stimulus will continue, so that the euro loss did not become critical. 


The dynamics of the yield of Italian bonds


Source: Bloomberg.

While the euro area governments can not agree, the ECB has to patch holes. Francois Villarua de Gallo said that the current situation breaks the world in the field of monetary policy. The head of the Bank of France is not against the use of "helicopter money" - a mechanism providing for a direct transfer of liquidity from the regulator to the business. This view previously strongly criticized by representatives of the German lobby in the composition of the Governing Board. Jens Weidmann and his supporters argued that the "helicopter money" blur the line between monetary and fiscal policy. 

Officials from France can be understood: according to the forecasts of the local central bank in the first quarter of the country's GDP fell by 6%, which is comparable, perhaps, with a 5.3% m subsidence of the economy in 1968, when there were mass strikes. And this is just the flowers! Berries appear later in the second quarter. Economists from Germany do not entertain any illusions: in the opinion of the five leading German institutions, the country's GDP in April-June prosyadet by 9.8%, in 2020 - by 4.2%. This is the most serious casualties of the eurozone's leading economy since records began in 1970. 

The dynamics of the GDP of France


Source: Bloomberg.

We can not say that optimism reigns among Americans. The consensus 57 experts Wall Street Journal, June unemployment to rise from the current 4.4% to 13%. By December figure drops to 10%, with the loss of jobs until the end of 2020, compared with February amount to 14.4 Mill. US GDP decrease by 25% g / g in the second quarter, but 85% of economists believe that recovery will begin in the second half of the year. In the third quarter, it expanded by 6.2% in the fourth - by 6.6%, reduced by 4.9% for the year. 

About 45% of respondents Wall Street Journal predicts that recovery will be U-shaped rather than explosive, as we would like Donald Trump. Experts expect modest growth of the Dow Jones index to 24,700 by the end of 2020. This estimate assumes the preservation of high volatility, which plays into the hands of the "bears" on EUR / USD, do not give up hope through support for the assault to recover 1,076-1,077 downtrend.


Source analyst LiteForex


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