Pandemic, Bank of England, Indian Issues and the EU Meeting

18 giu 2020

The pandemic situation continues to deteriorate. The number of new cases in the world is keep on growing. Significant share of this “success” belongs to Brazil, which breaks new records, bringing the daily number of cases to 35,000. Concerns are also giving China, where a new outbreak of the pandemic has been recorded. So far, there are hundreds, not thousands of cases, but all this does not look very good, especially in light of the main fear of the markets - the second wave.

Situation in India is stably bad (10K-11K per day). A pandemic is far from the only problem of the country. The sluggish conflict with China over the “neutral” border territories is growing from hand-to-hand fighting and throwing stones into full-fledged armed clashes with dozens of dead. We will multiply this by problems in the economy and get a recommendation to “sell” for both the Indian rupee and the Indian stock market.

Yesterday a lot of inflation data was published. And in general, they are rather bleak: the current economic crisis is not only a decline in production, but also deflation. And this is very bad, since it entails a full-fledged economic depression.

Today it is worth paying attention to the statistics on jobless claims in the USA (analysts expect that the number of new unemployed in the USA will replenish with another million).

But the main event of the day is the meeting of the Bank of England. The markets do not expect the Central Bank to move interest rates into the negative zone, but expect the expansion of the quantitative easing program from £ 645 B to £ 745 B. If this happens, the pound will receive the first positive news in the last couple of weeks. Otherwise, the disappointment will be so great that the pound selloffs will be inevitable.

On Thursday-Friday there will be an EU summit. The fate of the proposal to create an aid fund of 750 billion euros will be decided. If the majority can convince a minority (Austria, the Netherlands, Denmark and Sweden), then the euro will receive an excellent opportunity for growth.