Welcome to the real world, Trump, Oil and Bank of Russia

24 Apr 2020

Yesterday's Eurozone and UK PMI indices can be called a cold shower or a return to the real world. The Eurozone composite PMI was at 13.5 (forecast 25.0). In the UK, the picture was even worse: 12.9 with a forecast of 29.5. The picture for the services sector in both cases was even worse 11.7 and 12.3, respectively. Obviously, this is a complete failure. Although the failure was absolutely expected, as we warned about in yesterday’s review.

In the light of such sad data on the pound, let us recall that EURGBP is in the buying zone, and sales of the GBPUSD pair are also quite promising.
Further sad statistics came from the USA. Data on jobless claims has traditionally been very disappointing (+4.4 million unemployed). In general, the woes of the US labor market have not yet seen an end. First the employees of the restaurant, hotel business, as well as factories and factories were injured, now office workers and support personnel have joined them. According to a Gallup poll, a quarter of working Americans believe they will lose their jobs in the next 12 months. So forecasts of an unemployment rate of 20% from a terrible tale are becoming closer to reality every day.

Other statistics for the United States also did not please: sales of new homes fell by 15.4%, as did PMI indices, which fell to area 27.

In this light, let us remind that the prices in the US stock market radically differ from reality. And sooner or later they will have to admit that everything is bad. And then we will witness a fall, the scale of which will amount to tens of percent. Accordingly, current prices are a gift to be taken. This is a winning lottery ticket, all that is needed is just to take part in this lottery.

The strengthening of the Russian ruble amid a decrease in panic in the oil market, we consider as another gift, which is simply criminal to ignore. The Bank of Russia today will almost certainly make it clear that there is nothing left for carry traders in the Russian Federation to do, so the ruble will have nowhere to go except to look into the abyss, especially with such oil prices. And the abyss is sure to look back.

And a few words about the oil market. Trump tweeted about the destruction of Iranian ships in response to their unsafe maneuvers and again introduced the variable “geopolitical tension in the Middle East” into the oil price equation. We, in turn, recall that the current situation in the oil market can fundamentally be described as nowhere worse. But there are about a dozen reasons that can improve the situation, beginning with a decrease in production from OPEC + and other countries, ending with the Trumps’ tweet mentioned above.