10.04.202010:11 Passionate projection (review of EUR/USD and GBP/USD on 04/10/2020)

We can say that something incredible is happening right now, since the coronavirus has magically disappeared from the editorials of all the media of agitation and misinformation. Self-respecting journalists suddenly turned from epidemiologists into hereditary oil workers. Moreover, the prolonged negotiations of the exporting countries on the issue of reducing oil production did not go without drama. However, the role of the main troublemaker was not Russia or Saudi Arabia, but Mexico. The descendants of the Aztecs definitely emerged from the negotiation process, allegedly due to the fact that they were imposed on conditions unacceptable to their proud nature. And as if by magic, all the media of agitation and misinformation shouted that the negotiations were broken and all that and even the price of oil immediately went down. However, after a couple of hours, Mexico said it is ready to reduce production by 100 thousand barrels per day. But in any case, the negotiations dragged on and will continue today. The most important thing in all this is that we see a clear desire of the largest oil exporters to reach a compromise that will inevitably stabilize the oil market. The trick is that there are no countries in the world that do not care about oil. Without oil, any country would have rolled back quickly a hundred years ago. Thus, if the oil market stabilizes, then the whole world economy may breathe out a little. After that, stabilization of the entire global financial market will begin. First, the raw materials market will come back to normal, followed by the stock market. Then there is the debt market, and so on. In short, this is very, very important. And the crucial point here is that if global markets can calm down a little, then the risks will decrease slightly. This means that major players will begin to gradually return to where the profitability is slightly higher than in the United States. The yield is now tight in the US, since there is so much capital there that there's nowhere to go, and therefore, profit is purely symbolic. It's a blessing that it still exists. That is, the stability of global markets is bad for the dollar, partly because of this, the dollar was losing ground yesterday although not without additional pullbacks.

Exchange Rates 10.04.2020 analysis

Now, let's move on to more uninteresting data, such as European macroeconomic statistics, which was ignored by everyone yesterday. Germany thought for a long time and finally issued that the surplus of the trade balance in February was not 18.2 billion euros, but already 20.8 billion euros. What will go on an additional 2.6 billion euros, has not yet been disclosed. And this happened due to an increase in exports by 1.3% and a decrease in imports by 1.6%. In short, continuous deepening and expansion. Things were good in Italy too. The fact that the decline in industrial production accelerated from -0.2% to -2.4%. The joy is that they expected the recession to deepen to -3.2%.

Industrial production (Italy):

Exchange Rates 10.04.2020 analysis

Similarly, the British statistics were ignored, which were beautiful in their own way. For example, the British found something in common with Italians and rejoiced with them. Indeed, the pace of decline in industrial production remained unchanged, although they expected acceleration from -2.8% to -3.0%. As a result, the flight is normal. But the economic growth rate slowed from 0.7% to 0.3%, which was worse than forecasts. Anyway, we were expecting a slowdown of only 0.4%.

GDP growth rate (UK):

Exchange Rates 10.04.2020 analysis

Now, we focus on the second reason for yesterday's slight weakening of the dollar. And we will talk about the labor market, which continues to create passion and continues to work. There was a crazy roll of initial applications for unemployment benefits this time. That is, the record of last week was not broken. For the first time, only 6,606 thousand applied for the benefit. It can be noted that this is as much as 261 thousand less than a week earlier. However, the number of initial calls a month ago was less than the difference between the values of two weeks. So the offices of the employment service are still stormed by several hard workers. But this time, they were joined by those who have not been able to find work so far, and are forced to submit a new application for benefits. Here, we saw a new historical record. Repeated applications for unemployment benefits were already 7,455 thousand, which is 837 thousand more than at the end of June 2009, when the previous record was set.

This interesting situation lies in the fact that the rampant growth in the number of repeat applications, was accompanied by an influx in the number of primary ones. And if the previous two weeks, still somehow held on, and did not seek to get rid of dollars, and even vice versa, then now, everything is already somewhat different. The American labor market is collapsing, which happens in real time. Nobody has ever seen anything like it before. And it is difficult to compare even with the Great Depression, since then there were no such statistics yet. And yes, everyone understands that if this happens in the United States, then something similar will happen in other countries just a little later. And there are no similar statistics in other countries that are kept on a weekly basis. Perhaps, this is already happening in other countries, but we will just see it later. Nevertheless, the fact of what is happening, especially the unprecedented roll of the number of repeated applications, is scary. The truth was not without a disappointment in the form of producer prices, whose growth rate slowed down from 1.3% not to 0.3%, but only to 0.7%.

Repeated Unemployment Insurance Claims (United States):

Exchange Rates 10.04.2020 analysis

Today, the market will be calm, as both Europe and North America celebrate Good Friday. In this case, data on inflation in the United States, which should show its decline from 2.3% to 1.5% will be published. Well, such a rapid slowdown in inflation is likely to make the Fed think about another reduction again in the refinancing rate, probably in emergency mode again. Well, this will lead to the fact that the yield of US government debt securities, which has already declined already, will go down even more. For some, maybe even below zero. And if everyone has only been doing what they were in recent years such as running from risk and shifting everything to the United States, then the reverse process may begin. Moreover, the vile oil exporters are going to stabilize the oil market, which will start the process of stabilizing all other markets. Thus, the dollar can only hope for a short memory, especially for journalists, and by Monday, no one will remember about it.

Inflation (United States):

Exchange Rates 10.04.2020 analysis

Any progress in the single European currency should not be expected today due to Good Friday. So today, we are hanging around the level of 1.0950 and monitoring inflation. It may be necessary to move towards the level of 1.1050 on Monday.

Exchange Rates 10.04.2020 analysis

The pound will behave similarly, and it will be at the level of 1.2500 all day, with a goal of 1.2625.

Exchange Rates 10.04.2020 analysis

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Uitgevoerd door Mark Bom,
Analytische expert
InstaForex Group © 2007-2020
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