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EURUSD forecast for 30.04.2020

April 30, 2020

April 30, 2020

Dollar fooled the marketsDmitri Demidenko

The Fed managed to hide its pessimism behind the willingness to take

active, aggressive measures

Try, try, and try again. Jerome Powell, at the press conference following the April FOMC meeting, did his best to keep the illusion of stability he had created. Federal Reserve Chairman noted that the central bank will take active, aggressive measures to shield the U.S. economy from the coronavirus, and patiently hold the interest rates around zero until the regulator is sure that the U.S. economy is heading for the high targets in the employment and price stability. In order to hold the S&P 500 bears back, the central bank has abandoned its principle of being independent of politics. The Fed’s didn’t use to call on the Congress for an increase in the fiscal stimulus, now it does, suggesting that the central bank needs help.

As the stock indexes have been up, the Fed seems to have reassured the markets, despite the change in its tone. In March, Jerome Powell spoke about a V-shaped rebound of the US economy. In April, he emphasized several times that there is hardly any hope for a quick rebound of the US GDP in the second half of 2020. The Fed is getting ready for a long struggle with the pandemic. During the next year or so, there will continue the uncertainty about the victory over the pandemic, the depth, and length of the economic downturn, the scale of the global shocks, and the recovery of the consumption and the domestic demand. In fact, even China, which has almost brought the COVID-19 under control, is giving away shopping vouchers to get people to go out and spend money again.

The downturn is deep. The US GDP lost 4.8% Q-o-Q, consumer expenditures featured the worst drop since 1980, the business investments were the lowest over 11 years. This looks incredible. In early March, the US economy was operating normally, and there were no signs that the longest economic expansion would end.

Dynamics of U.S. GDP

![LiteForex: EURUSD forecast for 30.04.2020][1]

Source: Financial Times

The worst is yet to come in the second quarter. According to Markit’s economic activity data, the US GDP should decline at a 37% annual rate, which will be the biggest drop since 1947.

In my opinion, Jerome Powell managed to clam down the markets and distract them form the change in the Fed’s stance. The US economy is likely to be U-shaped, so the 30% rally of the S&P 500 up form the March lows looks too strong.

Investors now switch their attention from the Fed to the ECB. After Fitch downgraded Italy’s credit rating, investors expect the Governing Council to take aggressive measures. When the euro-area governments fail to find a compromise on the fiscal stimulus, the ECB is likely to take the responsibility. If the European Central Bank doesn’t boost the QE pace in April, it may at least give a clue on such a step in the future.

Dynamics of European QE

![LiteForex: EURUSD forecast for 30.04.2020][2]

Source: Bloomberg

The euro options market doesn’t expect any strong moves, and it seems to be right. The [EUR/USD ][3]is stuck in the trading range of 1.08-1.09. Will Christine Lagarde make it be trending?

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Price chart of EURUSD in real time mode

![Dollar fooled the markets][6]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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