Week in a Glance: Trump’s Plan and Pandemic, China and IMF

20 Apr 2020

Last week was traditionally full of records and loud statements. The loudest traditionally was Trump, who presented a three-phase plan to re-open the US economy. Given that no deadlines have been announced, and the criteria for implementing the plan are quite stringent, it’s even more than premature to be optimistic. Rather, it is an attempt to make a good face in a bad game.

Just because last week the number of new COVID-19 cases exceeds 2 million, and in the United States this week may well see the first millionth case.

In general, voices about leaving the lockdowns sounded louder last week. From the very start of May, Germany will start to re-open the economy: first it will open small shops, schools and unlock the activities of car dealers.

At the same time, everyone is looking towards China, which has already come out of the lockdown, and in theory shows what will happen to the rest of the countries in a few weeks. Including situation in economy. Last week, data were released on GDP (-6.8%), industrial production (-1.1%) and retail sales (-15.8%) for March. The data are terrible (the first decline in China's GDP over the past 50 (!) years), but the consensus is such that it could be much worse. In this regard, the hopes for the happy end activated, which led to a sharp increase in stock prices.

We continue to be pessimistic and recommend using this growth as an opportunity for sales. On Tuesday, the IMF published their vision of the current situation as well as future projections. Overall current economic problems are much worse than the global financial crisis (IMF expects a 3% drop in global GDP for the year).

This week we will continue to buy EURGBP. There will be a lot of statistics for the UK, which will almost certainly be unpleasantly surprising. In addition, the UK returned to the negotiating table with the EU, which means an almost guaranteed influx of negative news.

Of the other planned events, we note the meeting of the Bank of Russia, which will almost certainly lower the rate and most likely significantly. For the ruble, this will be a strong blow. So do not wait until Friday and sell the ruble now, while it is still relatively expensive.

Medium-term oil purchases continue to be relevant for us, since market self-regulation mechanisms are already in place. The number of active oil rigs in the USA decreased in just a week by 66 to 438 units, and oil production in the USA decreased by 100 K bpd in a week to 12.3 million bpd (in March production was 13.1 million bpd).

Our basic medium-term positions are as follows: sales on the stock markets, oil purchases (last week we added purchases from $ 20 in the WTI brand) and gold purchases, sales of the Russian ruble and other emerging currencies (for example, the Turkish lira, Indian rupee, Mexican peso), as well as the purchase of EURGBP.