March 31, 2020 — 2 min read
The AUDUSD opens at 0.6137 and the NZDUSD opens at 0.5950 this morning.
Some mixed data overnight, which has resulted in fairly choppy trading. PMI data out of China was surprisingly good, but,in fact, did little to move the markets. Whenever you get good news or data points these days it is still very hard to come away from the fact that things are going to get a lot worse before they get better. Goldman Sachs, (who are clearly net short stocks), have predicted Q2 GDP in the states to come in at -34%. Usually the market panics if GDP comes in at 2% rather than the 2.2% forecast, so the magnitude of the drop is unprecedented. You are talking unemployment forecasts worse than the Great Depression.
The main thing governments can do is spend, and spend large to try offset it. Debt to GDP ratios, which are already very high in certain countries, are going to get worse. On top of that, if debt increases, and GDP drops by a third, then the ratio completely blows out. We may see US GDP go from circa 100% to closer to 200% in a years’ time. Don’t even get us started on the “safe haven” Japan which is already sitting at 234%...Therefore you could argue if keeping this ratio down is your goal, then governments are incentivised to spend and increase debt even more. It is likely that there will be many countries though, for which this debt burden becomes unsustainable.
Non-Farm employment data out of the states overnight is expected to come in at -150k jobs, though if this missed by a factor of 10 it is hard to imagine anyone batting an eyelid.
Global equity markets are up mixed, Dow -0.6% S&P 500 -0.6%, FTSE +2%, DAX +1.2%, CAC +0.4%, Nikkei -0.9%, Shanghai +0.1%.
Gold prices are off 2% to USD$1,584 an ounce. WTI Crude Oil prices are up 1.5% to $20.43 a barrel.
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