The news that US President Donald Trump is about to cancel quarantine measures in May led to the strengthening of risky assets, as well as the growth of US stock indices. However, there are no strong proofs that COVID-19 is really slowing down in the US, and the number of confirmed cases reached 560,000 last Monday. In total, an average of about 31,000 become infected per day, however, last Sunday, this figure began to decrease to 29,000, which may have prompted Trump to make several tweets on this subject. The US president said that opening the country is his decision, and this issue is currently being worked out with local leaders.
Experts disagree to such decisions. Although the longer the quarantine is, the more it will affect the state of the economy, hasty removal of measures can lead to a new outbreak of the pandemic. Recall that the disease has already infected more than 2 million people all over the world, and has killed more than 114,000.
Meanwhile, the President of France, Emmanuel Macron, announced that he would extend quarantine measures up to May 11 of this year only. He expects that as soon as it is lifted, economic activity will begin to gradually recover. Businesses, schools, and childcare facilities will open and resume immediately after May 11, but public places, including restaurants, hotels and movie theaters, will remain closed. The borders will also remain closed until further notice.
Given the lack of important macroeconomic statistics earlier this week, any positive news related to the slow down of the pandemic will positively affect risky assets, including the European currency.
The data on the economic activity of the Federal Reserve Bank of New York indicates how much the crisis hit the economy. According to the report, the index of economic activity in New York for the week of March 29 to April 4 fell by 8.89%, after falling by 3.23% from March 15 to 21. The sharp decline is directly related to the deterioration in the labor market, as well as in the sharp increase in the number of applications for unemployment benefits. The index is relatively new and is aimed at identifying the economic damage caused by the coronavirus.
Yesterday, the National Bureau of Economic Research also published a report about the problems that small businesses in the US are currently facing. According to the data, about 43% of small companies have suspended or ceased operations, and for those who are still afloat, staff was reduced by an average of 40%. Moreover, almost all companies expect to receive assistance from the government, in the form of additional loans as part of stimulus packages that were implemented by the Fed and the Congress last March and April. However, many business owners expect to face serious problems in applying for it because it requires confirmation of the reasons for obtaining it.
Meanwhile, Richard Clarida, vice-chairman of the US Federal Reserve, said that the Fed's response was timely, ambitious, and completely appropriate. He is confident that when the economy recovers, the committee will be able to curtail lending programs, ensuring that the economy will not suffer. According to him, problems persist because of the low demand, which will certainly affect inflation. However, the Central Bank has many tools that could prevent this deflation.
As for the technical picture of EUR/USD, the pair remained unchanged, and the immediate goal of the bulls is still the high of 1.0970. Breaking above the level would help buyers reach the resistance level of 1.1040, and get to the local high in the area of 1.1140. However, if pressure returns, the bulls will again protect the support level at 1.0890, as lack of demand at this level can quickly push the euro to the lows of the week at 1.0830 and 1.0770.
