Risk appetite is growing, Germany vs. ECB, ADP data

Yesterday was filled with optimism and the growth of risk appetite against this background. The reasons for optimism are still the same - the expectation of the end of the pandemic and the partial opening of a number of European economies.

As a result, the Fear Index is falling, and stock markets, on the contrary, are growing as well as oil and emerging currencies.

Judging by global statistics, there is absolutely nothing to be happy about so far. So we are still inclined to go against the market and recommend sales on the stock market, selling currencies of emerging countries against the US dollar (first of all the Russian ruble). And in general, according to Deutsche Bank analysts, May is traditionally favorable month for the dollar. So buying a dollar seems like a good idea to us.

You can also buy dollar against the euro. Yesterday the German Supreme Court put forward a three-month ultimatum to the ECB regarding the asset purchase program. The European Central Bank must clarify a key bond buying scheme to support the Eurozone economy, which should be “proportional” or the German central bank (Bundesbank) can no longer participate in QE.

This could potentially lead to a radical revision of QE volumes. Given that the situation in the European economy is extremely poor, this may ultimately increase current problems. In general, the news is not very good for the euro, as well as for the European stock market.

Let’s not forget about the tensions between the United States and China. China did not take up arms against Trump, but against Pompeo, calling the latter a liar and evil.

Yesterday, US business activity indices were published. The data came out not as disastrous as they could, but in any case turned out to be very weak.

Today is also quite important day in terms of macroeconomic statistics. These are US employment figures from ADP in April. Forecasts are frankly frightening -20 million. Modern statistics did not know such a failure in principle. So US stocks in the afternoon are likely to undergo massive sales. Moreover, the markets will react not even to the numbers from ADP, but to future NFP data, which will be published on Friday. But the dollar may well become stronger, because the markets will become scared again and the risk appetite will decrease, while the dollar as a safe haven, on the contrary, will win.