US data, ECB forecasts and a trillion of Japan

28 May 2020

Yesterday, optimism in the financial markets was fueled by information from Japan about the introduction of a new $ 1,1 trillion stimulus package. Thus, the total economic assistance program in Japan reached $ 2.18 trillion (234 trillion yen), which is equivalent to about 40% of the country's GDP. As a result, Japan almost caught up with the United States, where the size of the stimulus package so far is $ 2.3 trillion.

The European Commission has proposed its mechanism for assisting the EU economy in the amount of 750 billion, of which 500 billion euros are planned to be given to EU member states in the form of grants, and the remaining 250 billion euros will be available in the form of loans.

The number of new coronavirus cases in the United States decreased to the March levels.

The second half of the week after being relatively unsaturated in terms of macroeconomic statistics promises to be much more interesting. On Thursday and Friday there are many macroeconomic indicators. So almost certainly the volatility will be quite high, which means that the opportunities for trading will be more interesting.

On Thursday, traditionally, the main focus will be on jobless claims in the United States. This is one of the most operational indicators (published once a week), and the labor market has suffered faster and harder than other components of the US economic system. Since the second half of May is the time for the US to partially exit the lockdown, investors are waiting for signals that everything is back to normal. Such a signal will be a sharp decrease in the number of jobless claims. However, forecasts continue to be rather pessimistic - about 2 million unemployed will be added to the total number up to 40 million.

In addition, markets are extremely interested in statistics on durable goods orders. Since this is April data, there is every reason to expect disastrous data. The revised data on US GDP for the first quarter will also matter, especially since there is a high probability of a revision for the worse.

A portion of weak data is likely to return markets to the ground. First of all, we are talking about stock markets, whose growth has long exceeded all reasonable limits for current conditions.

So today we will sell in the US stock market. Also, the growing concern of investors, in our opinion, will lead to an increase in demand for the dollar. Dollar Index is now at the local bottom, so it has much potential to grow. That is why we will sell EURUSD, GBPUSD and AUDUSD today.

Sells Euro are especially relevant in light of yesterday's forecasts from the ECB, according to which the Eurozone GDP by the end of 2020 will decrease by 8% -12%.

Tensions between the US and China continues. So far, more in verbal form than, in fact, which explains the lack of reaction to them in the financial markets. But everything indicates that this is only the beginning. And no one will definitely like the continuation.