Another positive signal is that the risk of dollar shortage, which has been widely mentioned in Q3-Q4 2019, has been contained by the Fed repo interventions. In the below chart, we use as a proxy the evolution of excess dollars in the US banking system. We see the inflow of USD in the financial system is supportive to the equity market (in this example the MSCI World) and to risky assets (such as the EUR).
Our assessment for 2020 is that global CB liquidity and USD liquidity will continue to grow which will lower USD funding costs, help EM assets, the EUR and the equity market and it will bring a welcome support to the global economic outlook.