The previous week was very nervous for all sectors of the economy. Thanks to the rapid actions of central banks it was possible to avoid a catastrophic fall of stock markets. In just a few weeks, huge amounts of money were injected into the world economy, indicating that central banks are on alert. They will fight the downturn in consumption and production.
Chart of the Day GBP/USD
All attention this week will be focused on coronavirus distribution in the US and Europe. The next few months will be key to the US presidential election. The launch of the Fed’s fourth phase of quantitative stimulus as well as the healthcare system will show how strong the current government is. Markets are reacting very sharply to any negative information, and on Friday investors decided to take profits. S&P500 index fell by 3.3%, DAX fell by 3.6%.
US Dollar and Euro
The two major world currencies are closely monitored by investors. The dollar has weakened because of the Fed’s money volley. It has to remain weak in order to maintain liquidity and economic recovery. If the dollar gets stronger, it is likely that the US Treasury will take additional stimulus measures. So far the dollar shows that the US government is doing the right thing.
But the Euro is in big trouble. After the failed EU summit, where they could not agree on the release of “coronobonds”, Europe risks losing a lot as long as the government takes action. Economic growth is collapsing, production is stopping, only the ECB is able to cope with the situation and support the economy. Probably, the Euro will not grow anymore in the current situation until some kind of action plan from the government appears. On Friday the Euro closed at 1.1140 .
The pound has shown very good dynamics over the past week. From Monday to Friday, the currency grew by almost 7%. The British government is taking enhanced measures to combat the epidemic. They also have a great opportunity to print their money, which will positively affect the economic stabilization. Great Britain now looks the best in Europe.
The drop in demand for oil has put Saudi Arabia in an unpleasant position. The Kingdom was wondering where it would sell what it was currently producing. The oil market has almost dropped by 50% and countries are not in a hurry to resume buying. If production does not fall soon, the market will go even lower. We may see oil below $20 or even $15 per barrel.
What’s waiting for us today?
08.00 Consumer price index in Spain for the year
13.00 Consumer price index in Germany for the year
15.00 US Real Estate Underperforming Index
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