The dollar may well have reached its peak against the backdrop of the Fed's active actions and the growing feeling that the worst for most financial assets are already behind. However, even despite the disappointing macro statistics in the USA and the decline in the yield of treasuries, the greenback is in demand as a safe haven asset.
Investors are still focusing on news about coronavirus and quarantine measures.
The new foci of COVID-19 in Europe and Asia indicate that the world is still unable to cope with the virus. The World Health Organization cannot say for sure what the probability of reinfection of already recovered patients is.
Even if some countries resume economic activity in mid-May, the borders will remain closed and social distance measures may be extended until the end of the year. This means that corporate sector earnings will remain weak in both the second and third quarters. This is far from the best news for the US dollar, but the situation for other currencies may be even more unfavorable. Obviously, the recovery in the American economy is needed for a global economic rebirth. This explains the fact that the greenback still attracts investors even in the face of weak fundamental US indicators.
In March, industrial production in the United States fell by 5.4%, a record high since 1946. Retail sales dropped by 8.7%, marking the strongest monthly decline since accounting began in 1992. The Beige Book of the Fed reflected a sharp decline in economic activity across the country.
In the second quarter, US GDP risks significant losses, and hopes for its recovery in the third or fourth quarters allow the IMF to talk about a 5.9% decline in the indicator in 2020.
No less concern among experts in Europe. In the next three months, EU is estimated to lose 8.3% in its GDP, analysts recently surveyed by Bloomberg said. In the first half of the year, the European economy is expected to decline by 10%, and by the end of the year by 5.2%. Italy and Spain, the largest outbreaks of the pandemic, will lose 7.3% and 5.7% of GDP respectively.
Meanwhile, the reluctance of national governments of the eurozone countries to go on the issue of coronabond has led to an increase in the yield of Italian bonds. The spread of their interest rates with German counterparts has widened to the maximum since the ECB decided to expand the quantitative easing program (QE) by € 750 billion. The increase in the differential yield of bonds of peripheral countries of the currency block and Germany indicates an increase in political risks in the region, which puts pressure on the euro.
Amid the prevalence of anti-risk sentiment in the markets, the EUR / USD pair fell below the 50-day moving average, failing to test the 1.1000 mark for strength.
If the pair again reaches previous lows near 1.0800, then the opportunity will open for testing levels below 1.0650.
