Coronavirus: US dollar could benefit from a prolonged recovery

The right question to ask about the US economy is not how deep will be the GDP plunge but how long will the shutdown orders prevent recovery, in the opinion of FXStreet’s analyst Joseph Trevisani.

Key quotes

“There is no reason to assume that the economic logic of the deeper the recession the swifter the recovery rule is untrue for pandemics.”

“The motivation for everyone, employers, workers, managers and markets to reconstitute their lives and fortunes will prove again that individual effort is the strongest engine of economic growth.”

“US and China will want to get their economies moving as quickly as possible and that will only be possible if each side cooperates in fulfilling the agreement. There should be no new disputes on the trade front.”

“The safety-trade to the US dollar and assets started to fade as equity markets have recovered and governments in Germany and the United States among others are discussing plans for a gradual reopening of their economies. If those revivals take place the dollar will continue to slip as the safety advantage is extracted. It will be likely to be several months before normal economic and interest rate comparisons return to currencies.”