Pandemic fears are roiling markets, driving a scramble for safety. The Federal Reserve’s drastic interest rate cut to near zero stoked fears of a coronavirus-driven recession.
A sharp cut in interest rates by the Federal Reserve ahead of schedule added to the alarm about the pandemic that has paralyzed supply chains and squeezed company revenue.
Europe is now clearly the epicentre of the outbreak: There are almost 170,000 cases of coronavirus globally and 6,509 reported deaths. In the past 24 hours, deaths and cases outside China surpassed the number inside China for the first time.
As the coronavirus continues to slam activity, shake up the global economy and weigh on investor risk appetite, central banks taking drastic measures to restore confidence in markets.
The previous week investors cheered efforts made by governments and policymakers to address the economic fallout from the coronavirus outbreak.
START TRADINGLQDFXperts – Weekly Forex report
It was a roller-coaster week for EUR/USD last week. The pair climbed close to the 1.15 level at the start of the week, only to reverse directions and fall below the 1.11 line.
GBP/USD was in free-fall last week, as the pair plunged close to 6 percent. The growing coronavirus crisis in the U.S., which has led to a travel ban on flights from Europe, has unnerved investors and triggered broad gains for the U.S. dollar.
The U.S. dollar rebounded nicely last week, as Dollar/yen climbed 2.5% last week. The Japanese yen is a safe-haven asset, but investors were seeing all green last week, as the U.S. dollar enjoyed broad gains.
The AUD/USD plunged 6.8% last week, as jittery investors sought the safety of the U.S. dollar..
The USD/CAD declined by almost 3 percent last week, as the pair briefly broke above the symbolic 1.40 level. With the BoC slashing a staggering 1.0% from the benchmark rate in just 9 days, the Canadian dollar has become less attractive to investors.
The week ahead – Markets dread coronavirus-driven recession
The Federal Reserve cut rates earlier on Sunday, in a coordinated move with other central banks to reduce rates to 0.25%. Looking ahead, the UK and Australia will release key employment reports, while the eurozone and Germany will publish inflation numbers.
- On Tuesday (17.03) the minutes provide details of the bank’s policy meeting earlier in March. At that meeting, the RBA lowered the benchmark rate from 0.75% to 0.50%. A pessimistic assessment by policymakers in the minutes could weigh on the Aussie. Investors’ focus shifts to UK Employment Data too. Wage growth slowed to 2.9% in December. The January forecast stands at 3.0%. The unemployment rate is expected to remain unchanged at 3.8%.
- On Wednesday (18.03) Eurozone Final CPI and Core CPI are both expected in at 1.2%, which would confirm the initial releases from earlier this month.
- On Thursday (19.03) Australia will be releasing its RBA meeting minutes and the Australian Employment Reports.
- On Friday (20.03) all eyes are on German PPI.This inflation indicator improved to 0.8% in January, up from 0.1% a month earlier while the indicator is projected to decline by 0.2% in January.
Follow this week’s economic calendar.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, CNBC, FX street