Pandemic in progress, Wuhan is waiting, but Trump can't wait

25 Mac 2020

The pandemic is in full swing and there are no positive trends around the world. The epicenter remains in Europe. And if yesterday we talked about possible losses of the US economy, today we will give a couple of figures for Europe. According to Goldman Sachs analysts, Italy’s GDP will drop by 11.6% in 2020, Spain - by 9.7%, Germany - by 8.9%, and France - 7.5%. In general, the Eurozone will lose about 9% of GDP. In this light, we recall our recommendation to sell the euro. But not against the dollar, we recommend to sell it against the British pound and the Japanese yen, that is, we sell EURGBP and EURJPY pairs.

This recommendation is confirmed by the March indexes of business activity from the Eurozone, Germany and France. All of them came out significantly worse than already pessimistic forecasts. For example, the composite Eurozone PMI for March was at 31.4 (!) mark with a forecast of 38.8 and a February reading of 51.6 (!).

However, the leadership of the Eurozone in the pandemic race is disputed by the United States. We already wrote that by the end of the week, the States may well catch up with Europe, especially if Trump realizes his promise to open the US as soon as possible.

That is why we do not recommend selling the euro against the dollar, because we consider dollar sales themselves to be a good trading idea in the light of everything that is happening now in the world and the USA in particular. We sell primarily against the Japanese yen. Do not forget to buy gold on the falls.

But there is some optimistic information as well. We mean the news that the capital of the Chinese province of Hubei Wuhan will be open on April 8. That is, China gives us a specific time marks for the duration of the epidemic. Of course 3 Chinese months may well be equal to six months in Italy or the United States, which have not even reached the peak of the epidemic. But you can still begin to prepare for the fact that soon the worst will be behind.

In this light, let us recall our medium-term oil deal (buy oil). Yes, here and now there are no actual reasons for purchases, but if you act in advance, then you can act just right now.

However, at the rumor level, there is information that the United States and Saudi Arabia can create a new alliance in the oil market and agree on coordinated actions. In addition, US oil companies are trying to gain support from the Government to ensure survival in the current environment.

Speaking of support, the amount of assistance to the economy from the US authorities can reach $2 trillion. As a result, yesterday for some time optimism gets back to the US stock market. But it's too early to talk about purchases. On the contrary, we use these growth attempts for sales.