Latest reports say that due to COVID-19 lockdowns, cash reserves reached $ 2.9 trillion. This is very good news because such a massive amount can cover a strong recovery from the recession.
According to Bloomberg Economics, household spending in the United States, China, United Kingdom, Japan and Europe have decreased due to economic lockdowns. That being said, if restrictions continue to be in place, cash reserves are likely to accumulate.
In fact, at the moment, the whole amount already reached $ 2.9 trillion. $ 1.5 trillion came from the United States alone, followed by China with 2.8 trillion yuan ($ 430 billion), Japan with 32.6 trillion yen ($ 300 billion), UK with £ 117 billion ($ 160 billion), and Europe with € 387 billion ($ 465 billion).
And if the governments finally lift the isolation measures, these money will return to the economy. Such would spur sharp growth in retail sales, which, in turn, will lead to inflationary pressures and a recovery in GDP. One of the factors that can make households spend their savings is low interest rates. However, people can also spend them to pay-off debt, especially since during the coronavirus pandemic, ultra-low interest rates led to a fairly rapid growth in the real estate market. There is also a possibility that households will hold on to their money due to persistent health risks or fears that the labor market will recover much more slowly than projected.
On a different note, the International Monetary Fund (IMF) is said to be revising its economic forecasts next week, mainly due to central banks changing their forecasts on US and China economies. Aside from that, it may also warn the people of high uncertainty amid new viral strains that threaten to undermine the pace of global economic recovery.
"Global economic growth is expected to be higher this year and outpace the January forecast of 5.5%," Kristalina Georgieva, managing director of the IMF, said. She also noted that more active growth will be observed in 2022, and that the IMF will publish an updated version of its World Economic Outlook on April 6.
But talking about the US economy alone, a stronger recovery will come from additional support measures and rapid vaccination of the population. These two factors will allow an early lifting of quarantine restrictions, which will resume activity in all sectors of the economy.
As for the EU economy, the situation is only getting worse every day. Obviously, its € 750 billion recovery fund is not working at all, especially after the German Supreme Court imposed a temporary ban on the country's participation in the program. Now, the European Commission no longer sees a strong economic recovery, so it is also understandable why investors dropped their positions in risk assets.
That being said, EUR / USD is currently ruled by the bears, so it is not a good idea to open long positions in the market. A break below 1.1715 will certainly lead to a further drop towards 1.1680 and 1.1640. But if the quote manages to return to 1.1750, EUR / USD may pull back to the 18th figure.
With regards to macro statistics, the Conference Board reported that consumer confidence in the US rose to 109.7 points in March, from 90.4 points in February. The Current Economic Conditions Index, meanwhile, rose to 110.0 points, indicating good economic growth. As for the Expectations Index, it jumped to 109.6 points.
Today, a number of reports are scheduled to be released, and they will most probably influence the market. These are: unemployment report in Germany, CPI for the whole Euro area, UK GDP for the 4th quarter, consumer prices and household spending in France, and US employment report from the ADP.
