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The Federal Reserve assures that it still has enough bullets, and the printing press is currently gaining a decisive victory as can be seen from the revitalization of demand for risky assets. The market clearly lays in the quotes a V-shaped recovery of both the US and global economies, and so far, it is calm about the unrest that has swept the United States. At the same time, it seems that investors are not paying attention to the worrying situation with coronavirus in Brazil and other countries. However, this is for the time being, only recently, the situation of COVID-19 in China was also ignored. The same applies to the riots. They cannot but affect the economy, but we are dealing with the inertia of growth, which allows the negative to accumulate. It is difficult to say which of the above will be the turning point, but it is well known that camels ' spines break not from a huge load, but from the last straw.
In the meantime, faith in a bright future stands due to a rebound in American business activity from the bottom of April which is the best statistics on employment in the US private sector from ADP, contrary to forecasts. In addition, the expectation that the number of applications for unemployment benefits in the country for the first time since March will increase by less than 2 million contributes to the growth of US stock indexes.
Thanks to the colossal monetary stimulus, the Fed managed to calm the markets, but now many people are starting to ask themselves questions, have the regulator overdone it? Will cheap money turn the recent decline in the USD index into a defeat of the US dollar?
In the spring, the Fed's balance sheet expanded by 70%, which is more than $7 trillion. At the same time, a similar indicator by the ECB grew by 18%, and the Bank of Japan by 8%. Therefore, it is not surprising that against this background, the greenback fell out of favor with investors.
Improving global risk appetite and the desire of market participants to get rid of safe-haven assets are the main drivers of EUR / USD growth. Along with this, the euro is supported by a surge of optimism regarding the preservation of the integrity of the eurozone.
In anticipation of the June meeting of the Governing Council of the ECB, the euro against the US dollar rose above the level of $1.1250, peaking from mid-March and having risen in price for the seventh trading session in a row.
Market participants are now not only determined to soften the ECB's monetary policy, but they also expect the regulator to increase incentives in July or September.
According to experts, the ECB must act decisively, even if in the end it does not have to use all the space for maneuver since it is better now to give the market everything that it wants than to receive another surge of disappointment.
"Apparently, an increase in the ECB's asset purchase program by approximately € 500 billion has already been put in quotes, and there is a risk of EUR / USD correction in the near future," said Mizuho Securities strategists.
"The market can react positively if the ECB expands its target for purchasing bonds or removes the limit for each country. However, in terms of overall size, it's difficult to expect a positive surprise now, "they added.
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