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Here is the Euro on three time horizons...

1. The tick chart (yes, I even fall for tick charts from time to time). Key level 1.0775.
2. The daily chart - Key level 1.0775.
3. The monthly chart - 1.0775
Meanwhile the EU is a shit show and the ECB have to keep printing more to stop spreads blowing out.

In all reasonable probabilities, Euro is not going to stay above parity in the next few months.
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Raoul Pal
@RaoulGMI
Question - Most stimulus packages for small business cash flow relief roll off globally in June. with most countries already having added 20%+ of GDP in debt to finance it, is it even possible for the EU to do more or is it constrained by its own criteria for country debts?
It's a genuine question because I am not sure that EU countries have an ability to add any more fiscal, even with the ECB buying bonds.

Thoughts appreciated.

Also...
Also, can the US justify much more stimulus with the markets pricing in a full recovery on H2? Or do we need to see existing stimulus roll off first and see how growth settles in Q3 and assess ongoing hit to cash flows then?

Just trying to think this all through, post-June.
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Raoul Pal
@RaoulGMI
The Dollar Standard:

The US Economy fell from 40% of World GDP in 1960 to just 25% today.

However, 79.5% of all world trade is conducted in US dollars.

84% of all non-domestic debt globally is US Dollar debt.

Around $100trn of global debts are denominated in US Dollars.
Total US domestic non-financial debts are $80 trn (and rising fast).

The Fed balance sheet is currently $7 trn.

If this recession is morphing into a global solvency event (which by definition is a slow miserable grind, not a shock and awe event, which is a liquidity event),
then the current strategy of the Fed trying to stave off debt impairment is near impossible but they will try and haha, the money printer will go Brrr...

But the dollar will continue to rise as demand for dollars rises.
Read 10 tweets
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Raoul Pal
@RaoulGMI
Amongst the bullish sentiment, UK 2-year gilt yields slump to negative for the first time in several hundred years of history. I listen to the bond markets, not the stock market. They understand the economy....they know something.
And 2-year US rates hit an all-time low.. 10bps. They are going negative too soon.

The bond markets are whispering deflation and insolvency.

Are you listening?

Or are you going to wait for the equity market to shout it, too late?
The Deadly Formula:

Debt + Deflation = A Ticket to Bankruptcy.
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