Fibogroup Market Analysis 2020

[fibogroup.com]

Fed cuts interest rate half a percentage point, largest emergency cut since the financial crisis

The US Federal Reserve at an extraordinary meeting unexpectedly lowered its key rate amid the spread of coronavirus.
The regulator’s release states that the indicator is reduced from 1.5-1.75% to 1-1.25%.
The next Fed meeting is scheduled for March 17-18.
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[fibogroup.com]

“The smell of panic”: US stocks collapsed after the “shock therapy” of the Fed

Shock therapy from the US Federal Reserve, which on Tuesday decided to urgently lower the interest rate, turned into a new sharp drop.

The decision to suddenly cut the rate was made after a meeting of ministers and finance and central bank governors of G7 countries ended in Washington.

Following its results, in a joint communiqué, the G7 financial authorities announced plans to “use all available tools” to “support the growth” of the global economy and “protect” it from the risks posed by the coronavirus epidemic, which has broken production chains and collapsed stock prices and raw materials .
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The decisions of the Federal Reserve are now clearly not enough to stabilize the market. A rate cut is a pill that only temporarily improves the economy.
We believe that after the Fed initiate the easing of monetary policy and the rest of the G7 countries (primarily the ECB)

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[fibogroup.com]

US announces new strategic oil sale

The US Department of Energy is preparing to hold another sale of oil from the strategic fuel reserve, where 635 million barrels of raw materials were stored at the beginning of March. The #WTI auction is scheduled for March 10th.

The supply volume is 12 million barrels of crude oil for delivery in April and May.

Although the volume does not break records, nevertheless even such a moderate impact on the world balance of the cost of black gold will help to keep oil quotes at low values.

Also, if we consider this situation in conjunction with the actions of OPEC, it turns out that the United States is aggressively and successfully squeezing competitors from the commodity market.

It can be assumed that OPEC measures are ineffective. They can only pretend that everything is under control, when it is not at all. We forecast a moderate decline in oil quotes in the first half of this year.
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[fibogroup.com]

Bank of Canada cut interest rates by 0.5%

The Bank of Canada on Wednesday, March 4, announced a reduction in the key rate to 1.25%. He attributed this to a reaction to the spread of coronavirus, a threat to the Canadian and global economies.
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In fact, it was not the virus that caused the easing of monetary policy, but the actions of the American mega-regulator. It is the emergency cut in the key Fed rate of America that forces other countries to do the same. Australia and Malaysia have already lowered interest rates. Also, representatives of the Bank of Japan announced the imminent adoption of similar measures.
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A more predictable situation is now in the Euro zone. The ECB will also be forced to launch regular incentives, but the maximum that the ECB can give is only a tenth of a percent (reduction in deposit rates by 0.1%) and this will not bring any obvious economic effect.
Due to the predictability of regulators, the situation on currency pairs is becoming clearer. #EURUSD after the end of a hard correction (coronavirus) Euro is destined to grow throughout the current year.
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[fibogroup.com]

Bank of England under pressure from the Fed
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On Tuesday, the US Federal Reserve made an urgent call to lower rates in response to growing concerns about the impact of coronavirus on the global economy. Canada, Australia, Malaysia were forced to lower their ...
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However, the Bank of England is abstaining, like the English gentleman - culturally, but adamantly: Mark Carney, the current manager, suggested that the Bank might consider lowering rates to mitigate the impact of the coronavirus outbreak on the UK economy.
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Mark Carney’s time ends and March 17, 2020 will be replaced by Andrew Bailey - a banker by vocation. His rhetoric differs from what the current chairman says, namely: at the moment the economy does not have enough room for maneuver in politics, but he (Bailey) can lower rates to 0.10%.
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From this we can conclude that at the next meeting on March 28, the key rate will be reduced, because Andrew Bailey will be in office for almost two weeks.
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We believe that future incentives will support #GBPUSD and purchases are quite attractive at the moment, because The price of the pound sterling is at the lows of the current year.

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[fibogroup.com]

Oil Armageddon brought down the economy

2020 barely began, and has already brought many shocks: the aggravation of relations between the United States and Iran, Turkey and Syria; decline in production in China due to coronavirus, and now there is also the exit of the largest player - Russia - from the OPEC + deal. This is what plunged the world economy into the abyss of chaos.
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Last Friday, the Minister of Energy of the Russian Federation made it clear to # OPEC members that Russia would not review its oil and gas policy. The answer was an increase in production by absolutely all participants in the oil cartel (and not only it)
as a result - # oil hit a record 20%
Failure in stock markets - in Asia, the decline was 3-6%, Europe is falling by 5-8%.
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A wave of bankruptcies is coming among American oil producers who produce shale oil on condition that prices are above $ 45.
Against the backdrop of risk aversion in the economies of Europe and Japan in a recession (they invested in #dollar assets, respectively, they are already losing 8-10% on currency revaluation - for the economy this is a powerful blow from which they may not recover)
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Considering where the prices for bonds are now (the Fed still needs to lower rates by 0.5% once to “legitimize them”), in the wake of incentives from the Central Bank of the World, money will go either to stocks or to gold.
We confirm the forecast for #XAUUSD - BUY !. Target - $ 1800

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[fibogroup.com]

The Bank of England unexpectedly lowered its rate to 0.25% per annum due to coronavirus
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From a press release from the Bank of England
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“After the spread of Covid-19, prices for risky assets and commodities fell sharply, and government bond yields reached a record low, which was accompanied by a noticeable deterioration in risk appetite and the prospects for global and British growth.
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Reducing the bank rate will help maintain the confidence of business and consumers in difficult times, strengthen the cash flows of enterprises and households, as well as reduce costs and improve the availability of finance. ”
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[fibogroup.com]

US Federal Reserve kicked off currency wars

What has already happened

March 3, the Central Bank of Australia lowered the interest rate by 0.25%

March 3, the US Federal Reserve at an emergency meeting lowered rates by 0.5%

March 4, Central Bank of Canada lowered rates by 0.5%

Friday, March 6 - OPEC collapse +

March 10, start of stimulus measures by ALL Central Banks of the world.

March 11, the Central Bank of England at an extraordinary meeting reduces the% rate by 0.5%
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What will happen soon️

The Fed will reduce the interest rate by 0.50% at a meeting on March 17-18 and again on April 28-29 - it will become zero.

The ECB will reduce its rate by 0.10% and resume quantitative easing.

The Central Bank of Canada at an extraordinary meeting will reduce the rate by 0.75%
As a result of the rate-cutting process launched by the Fed, Japan and Europe suffer the most.

In Japan, as much as half a year, the recession is constantly talking about this, Mr. Kuroda. Economic activity is declining. With zero interest rates and zero inflation (a fabulous country, isn’t it)) The regulator, which has invested most of its reserves in American bonds, suffers losses due to currency revaluation (currently about 9%). It turns out an analogue of margin call, only on a state scale. Investors flee to the Japanese yen.

In Europe there are a lot of zombie companies that are overloaded with debt and will be forced to suffer losses due to rising inflation. With near-zero rates, this puts Europe on a par with the Japanese economy. Plus, against the background of coronavirus, business activity and demand are falling (and this process is accelerating).
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When Europeans and Japanese sell bonds, they take them home, which further drops the dollar, strengthens their currencies and creates problems in Japan and Europe:
Forecast Value #USDJPY 95.00
Forecast value #EURUSD 1,2000

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[fibogroup.com]

Crisis: Donald Trump moves markets again

Having come to power almost 4 years ago, Donald Trump carried out very loud verbal interventions.
Against the backdrop of the fierce remarks of the billionaire president, there is even a new way to analyze the markets - #TwitterTrump.
However, over time, the effect of these statements came to naught. And again, Donald managed to influence the situation.
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- USA closes borders for travelers from Europe for the next 30 days.

- These restrictions do not apply to the UK.

- This is not due to the economic crisis.
(c) Donald Trump
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Despite his assurances that there was no connection with the global economy, the world markets continued to fall - the indices of Asia, Europe, the United States went into the negative zone.
Some commodity currencies are losing more than 2% today.

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[fibogroup.com]

ECB: NO Signs of Tension

At today's meeting, the ECB left interest rates unchanged. The accompanying press release states: - “The Board of Governors does not see significant signs of tension in the money markets or lack of liquidity in the banking system.” (C)
But despite the apparent calm, the ECB still announced a new refinancing program (#LTRO) to support liquidity in the money market. To avoid defaults, the ECB also softens capital adequacy requirements for commercial banks.

In a published press release, the ECB is disingenuous, there is tension, and quite strong, it can be seen in the dynamics of major currency pairs.
Funds and banks currently have serious budget holes, they have to sell off defensive assets (note the decline in #gold today).
Investors simply pull their money out of #treasuries and gold to avoid margin calls.

The situation is becoming more and more interesting, theoretically, you can even earn money on it (for example, buy gold at the current failure), practically you can buy one bottom and get a couple more as a gift.
Traders - people are not superstitious, but still, #13thFriday has a good chance of becoming a new storyline for a film about the financial crisis.

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