As strange as it sounds, this week begins for the US currency with a war. According to experts, the determining factor for the dollar will be the relationship between China and the United States, which decided to launch a new version of the trade confrontation.
The reaction of the markets to the actions of the major powers was close to a shock. In a world where the COVID-19 pandemic is raging, adding internal contradictions seems like the height of insanity. However, reality dictates its conditions.
Experts do not exclude that the confrontation between Washington and Beijing will reach a new level, rapidly gaining impulse. The destructive actions were catalyzed by statements by US President Donald Trump about China's guilt in the appearance of a coronavirus that paralyzed the world. The next step of the American leader was the US attempt to "disconnect" the Chinese technology giant Huawei from global chip suppliers.Analysts perceived this as a kind of revenge by the White house for hiding the most important information about COVID-19.
The current situation adds nervousness to D. Trump, who, in addition to the economic disorder and problems in medicine associated with the influx of patients with coronavirus, is trying to solve the issues of the upcoming presidential election. Earlier, the American leader counted on re-election, but every day, in proportion to the number of sick and dead from COVID-19, these hopes are disappearing. According to analysts, the head of the White House lost all the trump cards that he planned to use during the election campaign. As a result, it remains only to "warm up" the trade conflict with China, which was previously paused.
The settlement of accounts in the current tense situation completely deprives the dollar of optimism. It begins to fall, although it still does not give up its positions. However, the fears of analysts are mainly caused by the European currency. It can be noted that the euro in the EUR/USD pair ended on a controversial note last week. Uncertainties add to the worrying outlook for the European economy, which has been hit harder by the negative effects of COVID-19. According to preliminary forecasts, the EU economy will fall by 7.5%, and the US economy will fall no more than 5% due to the pandemic. In this situation, the euro is doomed to a downward trend, experts say.
Another option for the development of events for the American and European economies and their currencies may be an interesting move - the establishment of parity in the EUR/USD pair. According to analysts, the classic pair came very close to the formation of a new trend, the vector of which is directed towards equalizing the price of the euro and the dollar. According to experts, such parity can be established no earlier than mid-summer. However, in this case, the price balance between leading currencies does not last long. Analysts believe that the long-term establishment of parity can unbalance the EUR/USD pair.
The market was surprised by the fact that D. Trump ceased to insist on weakening the dollar. According to analysts, this may be due to the intention to take revenge on China and complicate its current trading processes. At the same time, experts consider the desire of the head of the White House to look positive in the eyes of future voters as another version. To do this, the American leader seeks to "score points" to become the winner in the upcoming election race. It turns out that to achieve their goals, all means are good. All that is possible has been launched: relations with China, cash flows in the economy and the possible strengthening of USD, which earlier was unacceptable to D. Trump.
According to experts, the former American presidents actively supported the national currency. In the light of recent events, D. Trump decided to adhere to this position and be in line with the compromising moods, regardless of the state of the global economy. It can be recalled that earlier, the head of the White House was a supporter of the dollar's weakening, since a strong USD interfered with active purchases by world manufacturers. Experts say that D. Trump currently does not take into account the actions of world leaders.
The position of the head of the White House has relatively stabilized the national currency. The dollar felt more confident, especially when paired with a "European" currency. On Monday morning, May 18, the EUR/USD pair started at 1.0820 - 1.0821. A little later, the pair moved a little higher, and now the EUR/USD pair adheres to the range of 1.0824 - 1.0825.
Strong support to the US currency was provided by the total flight of dollars by investors, due to the rapid spread of the coronavirus. At the moment, the craving for safe haven assets, primarily the USD, has weakened a little, but it has not gone anywhere. It is a constant fuel for the "American" currency, not allowing it to weaken. In the current situation, D. Trump can be calm: his country's currency is in the best shape. In case of a slight subsidence, the dollar is able to recover quickly, which has repeatedly proved to the market.
The strength of the dollar and its reliable reputation will help the American leader in implementing the upcoming grandiose plans. It can be recalled that the head of the White House intends to borrow over $ 4.4 trillion over this year. This amount is needed by D. Trump for further economic recovery. Over the years, his administration plans to borrow amounts that will be larger than before. According to the remark of the currency strategist, having recruited D. Trump to his allies, the dollar will continue to strengthen in the near future. The analyst concludes that this will be in the hands of the US currency and the national economy, since the US Treasury needs external loans.
