As the COVID-19 Numbers Begin to Ease, the Apologies Begin. Will It Be Enough?

The big news from the EU on Thursday was a marked shift in behavior in Brussels.

Perhaps in acknowledgment that the EU project is facing its biggest challenge yet, EU President Ursula von der Leyen stepped up to the plate…

By historical standards, an acknowledgment that Brussels failed Italy at the time of need was certainly not from the Establishment’s playbook.

The Italian government, along with the Greek, Spanish and numerous others have faced the wrath of Brussels of late.

A decision to keep borders open at a time when borders should have been closed was undoubtedly the first mistake.

We won’t expect any member state to acknowledge such a blatant underestimation of the potency of the virus.

China was already in shutdown mode and had also warned the world of all that was to come. Perhaps, China’s urgency to warn the world was not considered to be the fog horn that it actually had been?

EU member states also failed to support Italy, Spain, and others, with a €500bn token gesture stimulus package.

Undoubtedly, if Germany was facing Italy’s woes, perhaps member states would have behaved differently. Or perhaps not…

Either way, an EU debrief is required. For the Spanish and Italian governments, if they wish to remain in power, even that may not be enough. The EU Commission President’s apology does not change what has now been etched in history.

Undoubtedly, voters in Italy, Spain and possibly France and Germany will want change. This is no longer about immigration, this is about sovereignty and being able to support one’s own…

The UK

If there was a time for the UK government to turn the screw on the Establishment, it would have been now.

While it would have been a logistical nightmare, the government could have very quickly closed its borders.

As an island, protecting UK citizens and guests would have been a far simpler task than the one faced by the likes of Italy.

A number of weeks ago, I had even suggested that the Pound could become a safe haven. This would have been quite a viable outcome had the UK government moved swiftly.

In the end, we saw herd mentality eventually deliver what should have been an almost immediate outcome and not an eventuality.

Once more, governments failed. While Italy and Spain had little option, having to fly the EU Banner, Britain could have stood alone.

As a result of the decisions made through late February and early March, the economic outlook is not just bad, but dire…

Fiscal and Monetary Policy Support

In a bid to repair the damage, governments and central banks have switched on the printing presses. Helicopters have also taken to the air to deliver much-needed funds.

Judging by the events of the last few weeks, Britain’s decision to leave the EU has been even more justified.

The question that remains, however, is whether there is a political party that can stand tall and make the decisions needed to make Britain great again.

Central banks and governments have a long way to go before they are off the hook. The UK government has absolutely no excuse to penny-pinch. If the Tories want to deliver, their actions today will define tomorrow’s Britain and the Pound.

What Lies Ahead

Following the IMF’s reality check on Tuesday, the markets are back on the move. Once more, we are seeing the bulls clinging on to positive news, however small and insignificant.

Trump’s talk of being willing to ease lockdown measures has countered the IMF’s doom and gloom.

For the U.S President, there is certainly a vested interest in keeping the U.S equity markets at current levels. Trump will also take the opportunity to deliver financial aid to farmers. It couldn’t have worked out better for a president that was about to lose the support of farmers as a result of the extended trade war.

Will it all come to a head? How equity markets are continuing to find support when economic data is signaling a meltdown beats me.

The markets are going to need plenty of cajoling to hold onto current levels. Even the VIX has been on the slide since mid-March.

During the global financial crisis, the economic downturn was minor relative to the IMF’s forecasts.

If economic data continues to support the IMF’s forecasts, is that one last sell-off on the cards?

Perhaps how citizens respond to a relaxing of lockdown measures will be the key to the puzzle. For the world’s largest economies, consumption will need to rebound and rebound quickly. That means that firms, both large and small, would need to ramp up hiring at the bell.

It all seems just too much to ask of companies that have been hit hard by COVID-19 and the measures to combat the spread.

If Trump had his wish, the U.S equity markets would be back at record levels and the Dollar Spot Index would be at sub-90…

Wishful thinking? Judging by how the markets have behaved in the 1^st quarter, even Trump could get his wish… A realist may suggest otherwise, however.

At the time of writing, the EUR was certainly not taking advantage of the risk-on sentiment. The EUR was down by 0.18% to $1.08904 against the Greenback.

Another 5.245m increase in initial jobless claims must be an alarm bell, even for Teflon itself…