The financial world was cheered up by the hope that the peak of the coronavirus epidemic had already passed and that everything would soon return to normal. Indeed, according to the data provided by Johns Hopkins University, the number of new cases of coronavirus infection is only declining day by day. Stock indexes even showed good growth. However, the currency market seems to have stood still. It seems that at the moment, only the currency market is thinking about the economic consequences that await the whole world. What are they waiting for? In many ways, economic difficulties have already begun. Macroeconomic data for March clearly demonstrate this. However, there are signs that the global flow of capital from around the world to the United States has already ceased. For example, in France, the yield on 3-month bills rose from -0, 486% to -0.477%, and 12-month-olds from -0.494% to -0.465%. The profitability of 6-month bills fell completely from -0.478% to -0.479%. Thus, the yield on European debt securities has somewhat stabilized, but American debt securities showed an increase in yield. In particular, the yield on 3-month bills increased from 0.085% to 0.125%, and 6-month bills from 0.10%, up to 0.16%. So it is more likely to talk about the planned reverse outflow of capital from the United States, although it is too early to draw far-reaching conclusions. The jump in US bond yields may be just a temporary reaction to the nightmare that is happening in the United States labor market. But this situation will almost certainly spread to other countries just a little later.
The UK stands out, where not just terrible macroeconomic data is coming out, but the threat of a permanent political crisis is still growing. The health status of Boris Johnson, who was infected by coronavirus, continues to deteriorate. According to a number of media reports, the British Prime Minister has already been transferred to intensive care. And against the background of how often prime ministers change in the United Kingdom lately, the situation looks very, very alarming, especially understanding what the consequences might be in the worst-case scenario. But it would be great to avoid them. Moreover, the permanent political crisis does not contribute to the development of the economy, which continues to show weak results. In particular, the index of business activity in the construction sector collapsed from 52.6 to 39.3. But they predicted a decline only to some 46.0. And we are talking about construction, which is directly related to the real estate market, which is one of the main criteria for determining the investment attractiveness of the United Kingdom. After all, construction and real estate operations are just over a fifth of the UK economy. Moreover, the construction itself is directly related to industry, and since there is such a serious decline, then the restoration of industrial production will have to wait a very, very long time. In addition, the pace of decline in sales of new cars, to put it mildly, accelerated from -2.9% to -44.4%. Simply put, the car market in the United Kingdom collapsed corny.
Construction sector business activity index (UK):
The situation is not good in the euro area, however, without the threat of a full-scale political crisis. So far, only economic problems are being addressed. The pan-European business activity index in the construction sector declined from 52.5 to 33.5. At the same time, a decrease to 44.0 was predicted. If we look at countries separately, the best situation is in Germany, where the index decreased from 55.8 to 42.0 with a forecast of 47.0. In France, where the index was expected to decline from 50.2 to 45.0, it declined to 35.2. But the worst situation is in Italy, where the index of business activity in the construction sector was supposed to decrease from just 50.5 to 42.0. In fact, plummeted to 15.9. I believe that no one suspected that indexes of business activity in general could have similar values until yesterday. Well, you can't ignore factory orders in Germany, which decreased by 1.4%. In fairness, it should be noted that they predicted a decrease of 3.0%. However, this does not get better. Like it or not, a decrease is a decrease especially when it comes to factory orders. Indeed, without their growth, it is not worth waiting for industrial growth.
Factory Orders (Germany):
But oddly enough, industrial production in Germany itself showed an increase of 0.3%. This is due to the recent surge in factory orders, which, although strong, is more an accident. For the most part, we are seeing a permanent reduction in orders. Thus, local growth in industrial production is clearly a temporary phenomenon. Soon, the decline in production will resume. In addition, Italy expects a slowdown in retail sales growth from 1.4% to 0.3%. And this is the data for March, when the coronavirus epidemic hit Italy in full force.
Retail Sales (Italy):
The UK has already fully reported for today. And according to Halifax, real estate price growth accelerated from 2.8% to 3.0%. But these are statistical quirks. The fact is that the real estate market in March simply stood up, and prices did not change at all. And in early spring, there has been traditionally a slight decline in housing prices in the UK. In addition, at the end of last year, there was a significant increase in housing prices. From all this, this acceleration of growth rates has developed. Given what economic damage will be caused by the coronavirus epidemic, we will see a significant decline in prices in the future.
Halifax Home Price Index (UK):
But the most interesting today are the JOLTS data on open vacancies, which show all the horror that is happening on the United States labor market once again. The number of these most open vacancies should decrease from 7.0 million to 5.6 million. In combination with an unprecedented increase in the number of applications for unemployment benefits, this confirms the idea once again that the surge in unemployment is primarily associated with the elementary bankruptcy of many small entrepreneurs. After all, the number of unemployed has risen sharply, and the number of free jobs is rapidly declining. And from this, it follows that unemployment will only grow and it will not end soon. The United States is entering a phase of prolonged unemployment. This will inevitably lead to serious economic consequences. The fact that the situation will only get worse, says the recent statement of one of the largest retail banks in the United States that the funds allocated by the Federal Reserve To support small and medium-sized businesses are simply not enough. We are talking about the fact that funds are needed ten times more. Although the United States government has already allocated a huge amount of money.
Number of Job Openings JOLTS (United States):
The EUR / USD currency pair found a variable support level of 1.0775 during the downward development, where it slowed down and formed a pullback. It is likely to assume a temporary fluctuation within the levels of 1.0775 / 1.0865, where the work will be constructed by the method of breakdown of the established boundaries.
The GBP / USD currency pair managed to decline towards the subsequent level of 1.2150, but it was not possible to maintain the set mood. As a result, there was a slowdown with a rebound. It is likely to assume that a temporary fluctuation in the flat structure awaits us, where the levels of 1.2150 / 1.2350 will become the boundaries of the amplitude this time.
