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EURUSD forecast for 25.05.2020

May 25, 2020

May 25, 2020

Dollar remembers the problemsDmitri Demidenko

The pandemic has worsened the problems of the global economy and

weakened the global economic state

You can’t be sure about anything. The [EUR/USD][1] should have rallied up as France and Germany agreed with the fiscal stimulus of €500 billion and the ECB is willing to continue doing its best to support the euro- area economy despite the ruling of Germany’s constitutional court. Especially since the German Bundesbank published on its website a positive report on the impact of QE on lending, the manufacturing sector, and inflation. However, the euro can’t be rising without the support of the US stock indexes. The decline of the US stock market and a higher demand for safe havens set the euro bears back.

Buy on the rumors, sell on the facts. Earlier, the S&P 500 was rising steadily amid the expectations of the reopening of the US economy, the hopes for the V-shaped recovery of the US economy, and some positive news about creating a coronavirus vaccine. It is clear now that the V-shaped recovery is unlikely, and the creation of the vaccine may take a long time. Only 10% of global investors polled by BofA Merrill Lunch expect a V-shaped recovery of the US economy. The rest of them believe that the economic growth will be held back by the weakness of the US labor market, a decline in the investments, and the growing public debt amid the huge fiscal stimulus.

According to the OECD research, rich countries are willing to pay $17 trillion of the debt, a part of which resulted from a decline in tax revenues due to the pandemic. As a result, the total debt of the advanced economies will rise from 109% to 137% of GDP.

Dynamics of the OECD countries’ debt

![LiteForex: EURUSD forecast for 25.05.2020][2]

Source: Financial Times

Without a COVID-19 vaccine, the global GDP won’t quickly rebound. On the contrary, the pandemic worsens the problems weighing on the global economy. Before the pandemic, the economic weakness was observed in China and the euro-area, which were pressed down by the trade wars, and in the monetary policy that was ultra-easy even without an extra stimulus. Nowadays, the problems are getting worse, the situation deteriorates, which increases the demand for safe havens. Moreover, the tension in the US-China trade relations is getting stronger. The trade dispute is likely to be escalated amid numerous factors. The White House bans the purchases of the Chinese securities by the US pension funds, the US has tightened the sanctions against Huawei and suggests the overseas companies, whose shares are traded on the US stock exchanges, must undergo an audit. Furthermore, Beijing is to impose the Hong Kong security law.

The euro is also weighed on by the expectations of the expansion of the euro-area QE at the ECB meeting on June 4. According to the minutes of the ECB April meeting, the central bank is willing to avoid its previous mistakes associated with the loss of confidence in financial markets, it is about to increase the asset purchase volume. The ECB has already bought securities worth €180 billion. Under the current QE pace, the ECB will have run out its resources by October. It has to take more measures. As a result, the [EUR/USD][1] is now trading in the consolidation range of 1.077-1.099, it may well continue falling to the support at 1.084.

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Price chart of EURUSD in real time mode

![Dollar remembers the problems][5]

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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  1. my.liteforex.com/trading/chart?symbol=EURUSD&returnUrl=true
  2. cdn.liteforex.com/cache/uploads/blog_post/eurusd/debt-oecd-25-05-20.jpg?w=30&s=0da248d115a6773eac2e78af65be9dc0
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  5. cdn.liteforex.com/cache/uploads/blog_post/eurusd/liteforex-blog-eurusd-25-05-20.jpg?q=75&w=1000&s=bf77ee41de0e99e14c939f963b8aa041