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The new assistance programs of the Fed and EU are aimed at securing business loans and supporting households from the crisis associated with the COVID-19 pandemic. Yesterday, the Fed announced a new financial assistance worth about $ 2.3 trillion, expanding its operations to small and medium-sized companies. Previous corporate lending programs will also increase.
During his speech, Fed Chairman Jerome Powell said that the new measures will ensure the most rapid recovery of the economy. The main priority now is to overcome the health crisis, and the Fed's role is to provide as much assistance and stability as possible. Powell said that he is ready to act decisively, actively and aggressively, until the first signs of economic recovery is seen. He noted that because of all the measures taken, the market's situation, as a whole, has improved.
Meanwhile, US Secretary of Treasury Steven Mnuchin made an optimistic forecast, saying that the US economy will reopen by the end of May this year. The Fed's new financial assistance will provide funds to small businesses, which will allow jobs to be maintained, providing employment to Americans.
According to the US Department of Labor, during the week of March 29 to April 4, another 6.6 million Americans applied for unemployment benefits. Recall that just a week earlier, this figure was 6.9 million. Before the coronavirus outbreak, 150-200 is the normal number of applications.
The US Department of Labor also reported that the producer price index fell by 0.2% in March, while economists had expected it to fall by 0.4%. The base indicator, on the other hand, which does not take into account volatile categories, increased by 0.2%. Overall, if compared to the same period of the previous year (March 2019), the total PPI increased by 0.7%, and the base PPI increased by 1.4%.
The report on the US consumer price index will be released today. It is expected to fall by 0.3% in March this year, after rising by 0.1% in February.
The deterioration of the US economy did not surprise traders. According to the University of Michigan, the preliminary index of consumer sentiment fell from 89.1 points in March, to 71.0 points in April 2020. Economists predicted that the index would be 75 points. The university said that the main drop in the index was due to the worsening conditions caused by the coronavirus pandemic.
Meanwhile, on Thursday evening, EU finance ministers finally agreed to allocate assistance worth more than 500 billion euros to counter the economic crisis and mitigate the effects of the coronavirus pandemic. Most of the funds will go to loans and assistance to citizens affected by the pandemic.
Against this background, the quotes of risky assets increased, and the euro was able to update its highs for this week. From a technical point of view, the EUR / USD pair has every chance to continue rising. The immediate goal of the bulls will be 1.0970, and a breakthrough of which will push the pair to the resistance area of 1.1040. However, if the pressure on risky assets return, the bulls will have to protect the support level of 1.0890, as the lack of demand at this level can quickly push the euro to the lows of the week at 1.0830 and 1.0770.
Oil
OPEC + countries have decided to reduce oil production. As soon as it was announced, oil quotes immediately rose slightly. According to the data, from May to June this year, oil production will be reduced to 10 million barrels a day. Coalition partners are also expected to cut production by at least 5 million barrels a day. As for forecasts made after the meeting, it is expected that in the 2nd quarter of this year, global oil demand will fall by 12 million barrels per day. By the end of 2020, demand will decrease by 6.8 million.
However, the joy from the decision did not last very long. After the speech of OPEC Secretary General Mohammed Barkindo, oil quotes once again went down. Barkindo said that the coronavirus pandemic has caused the fundamental indicators of the oil market, as well as supply and demand to change, and they are now much worse than before. Because of the oversupply and low demand in the oil market, oil quotes dropped again to the area of the annual lows.
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