Although risky assets, particularly euro and pound, and the US stock market grew, negativity still looms in the market.
Yesterday, the Federal Reserve Bank of San Francisco said that the effects of the coronavirus will be felt for a very long time. Moreover, the process of getting rid of it will be much more difficult than many people think, as the impact of various threats on the economy, such as wars, crises, socio-economic upheavals and viral pandemics are very destructive. Their implications will continue on macroeconomics for over 40 years.
Experts at JPMorgan said that another mortgage crisis may occur in the US. Many Americans have lost their jobs because of the pandemic, so the banks are already preparing for the largest wave of late mortgage payments in history. Just last week, 17 million Americans applied for unemployment benefits. Most likely, this is one of the reasons why US President Donald Trump, despite the imposed quarantine, is trying to resume the economy as quickly as possible. According to experts, if by the end of this summer, major businesses in the US do not resume their work, about 30% of mortgage borrowers will stop paying mortgages, which will result in loss of property.
Yesterday, the International Monetary Fund forecasted that due to the coronavirus pandemic, global GDP will fall by more than 3% in 2020. A loss of up to $ 2.7 trillion is expected, from a total money supply of $ 90 trillion.
The government of France, on the other hand, expects that the country's economy will shrink this year. Bruno Le Maire, finance minister of France, said that the economy is expected to decline by 8.0%, and GDP by 6.0%. It is possible that the 2.0% came from the revised draft budget, which grew as a result of the new financial package, where aid was increased from 45 billion euros to 100 billion euros, which is about 4.0% of France's GDP.
Meanwhile, according to the Retail Economist and Goldman Sachs, US retail sales index fell by 5.6% in the week of April 5 to 11, and fell by 22.2% in the course of the year. In addition, Redbook said that in the first week of April, sales fell by 8.3%, and declined by 2.0% compared with the same period in 2019.
Fed spokesman Charles Evans said that the economy may begin to recover in the second half of the year, however, the recession will be very deep. Therefore, the impact of the pandemic on the economy may persist for a long time, and even in the most optimistic scenario, the economy will be weak after the pandemic. Evans expects very bad economic data in the 2nd quarter of this year, which will begin to arrive today. Data on the volume of retail sales for the month of March will arrive today, which may have collapsed by more than 8.0%.
As for the technical picture of EUR/USD, the direction of the euro will base on the reports that will come out of the economic calendar in the near future. Weak indicators on the US economy will return the demand for dollar, where a break of the support level of 1.0940 will lead to the demolition of stop orders of buyers, which will quickly push the pair to the lows of 1.0890 and 1.0830. Buyers of risky assets can only hope for a large increase above the highs of this week, as well as the break of the resistance level at 1.0990, which will push the euro to the areas of 1.1040 and 1.1100.