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What wants to say a dollar? USD decline of the index will indicate the approach of victory over coronavirus


Can those who are now selling EUR / USD, be attributed to the enemies of humanity? It is! Many experts believe greenbacks best indicator of the health of the world economy than the VIX, or FRA-OIS. Bank for International Settlements calls it a key measure of bank risk. When financial institutions rushed to the middle of March, to obtain financing, the USD index has grown for 10 consecutive days. The dollar strengthened in response to the terrible statistics of the US applications for unemployment benefits, and BofA Merrill Lynch argues that the USD index falling below 96 would indicate that the coronavirus associated with trouble, most likely passed. 



The fact that the change of course of greenbacks is closely related to the pandemic, it is not necessary to argue. As, however, and the fact that the improvement of the epidemiological situation reaches out to US stocks. S & P 500 at the auction April 6 grew just 7% and reached a peak in mid-March after it became known that the situation in New York is stabilized, the number of infected people in Italy, Spain and France is shrinking and forecasts for mortality in the United States declined from 176 thousand to 82 thousand. at the peak epidemic the number of deaths per day may reach 2644, 3130 and not, as previously assumed. 

Despite the fact that large banks are afraid of astounding predictions of subsidence of the US economy (one of them added Credit Suisse, claiming that US GDP will decline by 33.5% in the second quarter and by 5% in 2020), advancing from Bloomberg indicator signals that the global recession on the fact may not be as serious as in 2008. Most likely, the dog is buried in the operational response of central banks and governments in the coronavirus. Never before a decision on the monetary and fiscal stimulus were not taken as quickly as it is now. 

The dynamics of the global GDP and the leading indicator from Bloomberg


Source: Bloomberg.

The finance ministers of the eurozone camp will seek to agree on an additional aid program in half a trillion euros. Currently, the size of fiscal stimulus is about 3% of the GDP exchange unit. The ECB has stepped up QE by € 750 billion, and in the week to April 3 bought the bonds for € 30.2 billion and a substantial part of which (€ 11.9 billion) was Italian. As a result, the balance of the European Central Bank is slowly but surely creeping up. 


The dynamics of the ECB's balance sheet


Source: Bloomberg.

US stock market can be pulled out of the abyss, not only by means of monetary and fiscal stimulus, but also supporting individual issuers. Rally for the shares of the oil sector companies the United States should say thanks to Donald Trump. The owner of the White House is doing everything possible to OPEC + the extraordinary emergency summit on April 9 decided to cut production by 10-15 million b / d. Otherwise, he threatened Russia and Saudi Arabia duties on imports. 

Growth of S & P 500, Brent and WTI clipped wings sellers EUR / USD. If the conditions of equity markets and oil will continue to improve, to overcome the resistance at 1,084 increase the risk increase of quotations of the pair to 1.0965 and 1.091.


Source analyst LiteForex


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