The escalation of the US-China trade conflict, which resulted in the collapse of the stock exchanges, has burned $4.6 trillion in May. It left the American government debt market to the upside.

Investors are running into defensive assets, as concerns about a slowdown in economic growth intensify. The Federal Reserve can pour money again over the fire like 11 years ago. Market participants are selling almost everything, except for the sovereign bonds of the largest countries in the world.

According to EPFR Global, the funds withdrew for a week up to $8.2 billion from US stocks, $1.8 billion from European and $2.8 billion from American "junk" papers. Losses in emerging markets amounted to $5.8 billion over the past two weeks, which was the worst result for the year.

Global anti-risk sentiment redirected capital flows. The most popular are government securities of America and Germany.

The yield of the German Bund with a maturity of 10 years fell to a historic low of minus 0.205% per annum. Rates on similar US securities collapsed earlier this week to a record low of 2.04% since September 2017. In early May, this figure was 2.5%. It is unlikely that this will be the limit. In connection with the expectation of a recession, a reduction in the Fed rate and the prices of US government securities will soar even higher but the yields will return to 2016 lows. It is expected that the Central Bank will lower rates by a quarter point in September and December.

What will Powell say?

On Tuesday, the head of the American regulator will make a speech, and he will need to clarify the situation that is occurring in the market. The fact that the States are on the verge of a recession, investors have already guessed on their own a rather soft monetary policy. That is, in the policy, which has not yet said a word to Jerome Powell.

As of now, market participants are waiting for three rounds of rate cuts this year with the nearest decline, according to their estimates at the July meeting. In a sense, the situation is absurd on why lower the interest rate with the current QT program, which should last until September. Although no one knows what decisions can be made.

It is worth noting that it was precisely the laying of soft monetary policy in the value of the dollar that weakened its position. This phenomenon is quite clearly seen in the dynamics of such pairs of EUR/USD, USD CAD, USD/JPY, USD/CHF, as well as GOLD and USDX.

It looks like traders are unlikely to lay down expectations for a few more lows. In this case, the sale of the dollar will end soon, but there is one "but." This is about today's Powell performance.

The Fed chief may not confirm market expectations and not hint at a policy easing but can he strengthen the dollar and will he believe the market? I would rather not believe, just as I did not believe the plans for 2019.

The status of the defensive asset will help the dollar.

Many global strategists are of the opinion that the dollar can stay afloat due to its protective status. Of course, its growth may stop when the Fed starts to soften the policy but you should not expect a serious fall about this in an interview on television, said by Rabobank foreign exchange strategy manager, Jane FoleyBloomberg, on Bloomberg. She also assured that the US Central Bank will lower the rate at least five times by the end of next year.