MacroResearchBoard

Diverging Trends – July 13, 2020

The debate about re-opening economies versus keeping a tight control over new COVID-19 cases continues to rage on around the globe. Some countries that have brought down the number of new infections to low levels have proceeded slowly in re-opening their economies. Others, conversely, have continued on a “full-speed ahead” mindset.

As examined in a just-published report, the diverging trend between the U.S. and aggregate euro area is stark: the latter has managed to keep new infections at a low level, whereas the U.S. has witnessed a huge surge, especially in the south and west. The economic implications are becoming clear: whereas mobility data shows the euro area gradually and steadily ramping up activity in workplaces, the U.S. has recorded a stall, if not outright reversal, as shutdowns and restrictions have returned in many states.

So far, equity and currency markets are not distinguishing much between the two regions, but this may soon change if recent trends persist – stay tuned.