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Most lockdowns will likely be toned down in four to eight weeks. However, economies won’t bounce back to their former levels. This together with sky-high debt loads will drive authorities towards inflation policies. This stagflation scenario will have immense repercussions for financial markets.
Does Europe have sufficient monetary and fiscal weapons to battle the coronavirus and will the continent succeed in becoming a relative attractive place for investors in these disturbing times?
The unwinding of carry trades and demand for dollars to reduce dollar denominated debts have resulted in higher FX volatility and a stronger dollar. How long will this continue and how does it influence the outlook for EUR/USD?
We have adjusted our targets for EUR/USD and USD/JPY due to a bigger-than-expected negative impact of the coronavirus on the US economy…
Longterm interest rates in the US and stronger Eurozone economies have risen since the March 9 lows. The million dollar question is whether this is due to renewed confidence in economic recovery or the result of increased distrust of the creditworthiness of governments. The latter would imply much higher long-term rates in the future...
Recession in the US and Europe is a near certainty, but policy makers could prevent the recession from causing the next credit crisis. The necessary monetary and fiscal measures could cause rising long-term interest rates in the future. However, for now the decline in long-term rates hasn’t ended yet…