Market Watch. Growth of the US government debt

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The Market Watch review. 19.08.2020

In today's release, we’ll cover the following topics:

  • Growth of the US government debt and stock market.
  • Inflation in Britain and Canada.
  • US oil reserves.
  • US Fed Minutes.

The current week began with a rather important event for all investors and traders - the update of the historical maximum by the Nasdaq stock index. At the same time, the S&P 500 index is holding several dollars from the previous maximum. All this points to the strength and stability of the economy. But everything would be fine if it were not for the rapidly increasing US national debt, which has already reached 26 trillion, and its growth rates are terrifying - 1 trillion per month, despite the fact that over the past 5 years it has grown by only 8 trillion.

In this case, the growth of the national debt is due to record volumes of financial assistance to combat the consequences of quarantine. As a result, we are still observing the weakening of the USD against most currencies, which will continue until the information on the readiness of the US government to reduce the volume of money supply into its own economy appears.

Moving to the European trading session, I would like to note the published report on inflation in Britain. The actual data turned out to be significantly better than the previous and forecasted ones, but the activity of buyers of the GBP/USD currency pair remained very weak, indicating that the USD remains the key driving force. Therefore, during the American session, I expect an increase in market volatility.

I would also like to draw your attention to the upcoming publication of inflation data in Canada. Economists are moderately optimistic about the release, which is positive for the CAD. At the same time, it is important to remember about the report on changes in oil reserves in the United States, because their further decrease may provide additional support for oil prices and, as a result, strengthen CAD.

Now let's move on to the main event of the day - the minutes of the Fed meeting. This is an important event for the markets, because any changes in the monetary policy of the regulator will lead to strong changes in the financial markets. For example, a statement about the need to raise the main interest rate or reduce liquidity will lead to a collapse of stock indices and an increase in USD.

Closely monitor the news background and be prepared for all the surprises of the market.

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