The main market tendency today is that the US dollar is rising against its major peers and riskier assets such as stocks and oil are plummeting.
How far can US GDP fall?
American advance GDP will be released on April 29 at 15:30 MT. It will definitely move USD as it will show the broadest picture of the US economic health amid the COVID-19.
Instruments to trade: EUR/USD, USD/JPY, USD/CHF, AUD/USD, USD/CNH, USD/CAD
It’s obvious that the present US lockdown will lead to a decline of the GDP. What is more intriguing for investors is how bad the indicator will be. Among other economic indicators GDP is the most significant one as it reveals almost every area of the US economy. The largest part of it, nearly 70%, is money that Americans spend domestically. Consumer spending collapsed, that’s why the future GDP fall will be so huge.
How would you rate the coronavirus recession among other US downturns on the Richter scale, which measures the severity of earthquakes? Didier Sornette, who heads the Financial Crisis Observatory, assessed it at a magnitude of 9, when the crisis of 2008 – 8.5. The St. Louis Federal Reserve anticipates the real GDP to drop by 15%. The Atlanta Federal Reserve gave a much better forecast of a 0.3% decline. According to Goldman, GDP will contract by 10%.
If GDP is greater than its forecast, the US dollar will surge, otherwise – drop.
Be cautious! This is a general rule. These days, the US dollar plays a role of a safe-haven currency. That’s why USD won’t fall so deep as the US GDP.
The European Central Bank will publish the monetary policy statement with the interest rate decision on January 21, at 14:45 MT time.
Joe Biden is going to unveil a Covid-19 relief package of about $2 trillion. After this announcement, the 10-year Treasury yield rose, adding support for the USD.
The US dollar’s weakness offered a boost to emerging-market currencies and oil.