About the recession, markets immunity to good news & US GDP

27 Nov 2019

The US and China have traditionally been optimistic about the progress in the negotiations, but apparently, the markets no longer respond to this. If you yell “wolf”, in the end, people will no longer come. Something similar we can see in the negotiation process between China and the United States. They have been optimistic for more than a month, but there is no breakthrough.

In this regard, we will continue to look for points for the purchase of safe-haven assets, which are providing excellent entry points.

We will bring up a topic of the upcoming recession. In yesterday’s review, we wrote about the forecasts of Societe Generale analysts who expect a recession in the spring of next year.

Recall, in March 2019 the so-called yield curve inversion took place (an anomalous situation when the yield on short-term US treasury bonds exceeds the yield on long-term bonds). As a rule, after this, a recession occurs within 12-18 months. Despite the fact that now the yield curve has returned to normal. In the spring comes the end of the countdown of 12 months. So analysts at Societe Generale are probably not mistaken.

Fed Chairman Jerome Powell, meanwhile, once again confirmed that the US Central Bank is likely to continue to hold a pause in interest rate policy actions.

Today, unlike Monday and Tuesday, will be quite busy in terms of macroeconomic statistics. First of all, we are talking about data on US GDP for the third quarter. Given that this is the second reading of the indicator, that is, the revised value, we do not expect any serious surprises. However, analysts do not expect as well, predicting the immutability of the preliminary assessment of 1.9%. In addition, you should pay attention to orders for durable goods in the United States, as well as the ADP report on the level of employment in the private sector. A busy day for the dollar will end with the publication of statistics on personal income and expenses, as well as incomplete transactions for the sale of housing.

Recall our position on the dollar - to look for points for sale for almost the entire spectrum of the foreign exchange market. But today we are acting with an eye on the output data. This is not about changing the direction of the trades, but about the possible emergence of more interesting points for its sales.