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EURUSD forecast for 25.06.2020

June 25, 2020

June 25, 2020

The S&P 500 sends the euro downDmitri Demidenko

The drop of the US stock market sets the EUR/USD bulls back

When the US stock indexes feature strong moves all the other trading assets are forgotten. Investors are focused too much on the global risk appetite to miss the second S&P 500 drop in the last ten days, which in its depth is among the TOP 15 of the worst crashes in the S&P 500 5-year history before the pandemic. Sharp drops remind that COVID-19 hasn’t been defeated and the US economy may not rebound quickly. Besides, if something has happened twice, I could happen for the third time. As I wrote earlier, the drop of the S&P 500 below the psychologically important level of 3000 will be a disaster for the [EUR/USD][1] bulls

The stock market depends on the news about the pandemic. The number of coronavirus cases has increased to 36,000, which is close to the record number of 36426 recorded in April. The governors of some states are going to require people arriving from states with high coronavirus rates to quarantine for 14 days. This sent the US stock indexes down. Investors are concerned that this is not just a temporary correction. The situation could be worse, and the US may lock down the economy again. The S&P 500 bulls bet on an improvement of the epidemiological situation in the U.S and the quick rebound of the US economy after the pandemic. This investment idea doesn’t seem relevant now.

Remarkably, the US stocks follow the IMF forecasts. The IMF downgraded the projections for the global GDP growth in 2020 to -4.9%, compared to the April reading of -3%. The international organization says the social distancing has hit the economic activity stronger than it was previously gauged. The global economy will take more time to recover than it was earlier expected. The current crisis is the worst since the Great Depression in the 1930s. It will cost the global economy $12.5 trillion, and the global debt will be up by 19 basis points in a year, at 101% of GDP. However, unlike the events of the beginning of the last century, the world economy will be able to recover in 2021-2022, it will not take a decade to reach pre-crisis levels.

IMF projections for GDP

![LiteForex: EURUSD forecast for 25.06.2020][2]

Source: Financial Times

The IMF expects the US GDP to contract by 8% this year and grow by 4.5% next year. China’s economy will expand by 1% and 8.2% over the same periods. If then the countries return to the growth rates that were before the pandemic, then, already in 2029, China will outperform the U.S. Donald Trump will do his best so that it won’t happen. Therefore, the escalation of the US-China trade war is a matter of time, though I don’t think it will start before the US presidential election.

In the meanwhile, the US targets the EU, as it has outlined a list of products worth $3.1 billion whose import tariffs can be increased because of the Airbus illegal state subsidies. Could it have encouraged the euro buyers? The drop in the US stock market and the talks about trade wars have discouraged the [EUR/USD][1] bulls who are going to fight for the supports at 1.124 and 1.117. If these supports are broken out, bears could develop a deeper correction.

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Price chart of EURUSD in real time mode

![The S&P 500 sends the euro down][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
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  5. cdn.liteforex.com/cache/uploads/blog_post/eurusd/liteforex-blog-eurusd-25-06-20.jpg?q=75&w=1000&s=615cab3e4db1fb2c8cd8f91095375400