From Powell to Merkel… Things seem to get more complicated!

The things Powell did so far made him a more popular and likeable than President Trump in the eyes of Americans. The Fed has proved that it’s a more powerful institution than the US military forces even without having an army, so to speak.

Fed Chair Powell’s press conference was among the highly anticipated events of the last week. He talked a lot but said almost nothing, or rather said nothing we didn’t already knew.

Predicting an unprecedented drop in economic activity in the second quarter, Powell said that unemployment rate seems likely to hit double-digits for the next few months, which is not normal at all because in good economic times, the US economy faces an average unemployment of 3.5%. But Powell sees a 10.4% unemployment decline in Q2. This figure would definitely put pressure on Trump before the US presidential elections.

As you know, the Fed had announced its new lending plans to support the economy. Helping investors breathe a sigh of relief, the Federal Reserve is to take actions to support employers of all sizes.

Saying that the Federal Reserve will use its powers forcefully to combat the economic impacts of the virus, Jerome Powell highlighted the decision by its policy-setting Federal Open Market Committee to leave rates intact and continue to buy bonds. By the time Fed’s press conference was over, we saw a rapid rise in all financial instruments, including BITCOIN.

The Q&A session showed that everyone is expecting the Fed Chair to perform a miracle! Powell said, “We will soon begin purchasing corporate loans from big businesses with at least an investment grade rating, a high bar that struggling companies won’t be able to meet” Addressing to a question about the U.S. debt, Fed Chair indicated that now is not the right time to worry about federal debt.

“Countries to seek compensation from China…”

Indicating that virus outbreak poses economic uncertainty, Powell said, “The economic rebound following the coronavirus-induced shutdown can be robust”. He repeated that the Fed will make every effort to ensure limited damage to economy and continue buying bonds. “It may well be the case that the economy will need more support from all of us, if the recovery is to be a robust one”, Powell added, calling on government for more economic stimulus and fiscal support to Americans who lost their jobs and salaries because of the coronavirus outbreak.

In brief, leaving rates unchanged, the Fed’s Federal Open Market Committee said they are committed to adopting additional monetary policy support. Although this statement has quite stimulated the Monetary and Capital Markets, the excitement was over by Thursday night.

The fact that first Chancellor Merkel and President Trump and finally the Australian government announced that they are to seek substantial compensation from China for damages caused by its mishandling of the global virus crisis caused tensions to rapidly escalate between China and Australia. Stimulated by Powell’s statements, markets were then stricken by this compensation shock. Stock Markets and Oil Prices hit hard amidst improvement efforts while Gold and Crypto Currencies started to show an upward trend.

See you tomorrow for further details about this compensation issue.