Week in a Glance: second wave, $3 trillion, Powell, Brexit, oil

18 may 2020

The past week has passed under the fear of the “second wave” - a new peak of pandemic due to the removal of quarantine restrictions. Recall that many countries are in a hurry to open up, even being unprepared for this. The quintessence of this approach, of course, was Russia, which, according to the results of the week, took the second place in the world in the number of cases, but at the same time it was decided to open the economy on Tuesday.

The US is also clearly in a hurry. And even the warnings of the country's main infectious disease specialist could not change Trump's ardor. Even countries such as Germany, prepared for easing restrictions, are now puzzled, as the number of new cases and deaths in the country last week began to grow again. So the fear of the second wave is quite reasonable.

The result was not only an increase in fear in the financial markets, but also the accompanying dynamics of the US dollar (strengthened), gold (increased by the end of the week) and stock markets (decreased). This was largely facilitated by the speech of Jerome Powell, who not only dispelled the myth about the Central Bank’s readiness to switch to negative rates, but was generally very pessimistic about the future of the US economy.

The past week can definitely be written in the liabilities of the pound, which was under pressure from both weak economic data and news from the negotiation fields, according to which the threat of “hard” Brexit in the current conditions is becoming more tangible. In this light, we recall our recommendation to sell the British pound, which remains relevant this week.

And finally, another, important event of the week was a vote in the US Congress on the initiative of the Democrats to allocate an additional $3 trillion to help the US economy in the fight against the crisis caused by the epidemic.

And a few words about the oil market. Fundamentally, the week turned out to be extremely favorable, starting from the decision of Saudi Arabia to further reduce production by another 1 million bpd, ending with the first decrease in US oil reserves since January 2020.

The upcoming week will be relatively calm in terms of macroeconomic statistics, that is, there will be a lot of data, but they can hardly be called decisive. Accordingly, it makes sense to continue to work as we did: to sell in the US stock market, buy oil, sell the British pound and buy the US dollar.