A slowdown in the number of coronavirus-related deaths calmed investor nerves and increased appetite for riskier assets. However, market volatility levels are still very high.
As lockdowns continue the economic impact of the epidemic is becoming more marked. Trillions of dollars wiped off stock market values during March.
The U.S. non-farm payrolls report that showed massive job losses of 701,000 last month, compared with expectations of 100,000 lost jobs. March’s contraction abruptly ended a historic 113 straight months of employment growth. The unemployment rate rose to 4.4% from 3.5% the previous month.
The dollar index posted a 2.3% gain on the week, having whipsawed last month from highs on a scramble for cash before slumping as the U.S. Federal Reserve flooded the market with liquidity.
The euro noted a 2.9% weekly loss. Indecision among euro zone governments about a rescue package for the region’s hobbled economies has weakened the euro. The Eurozone economy was sluggish before the COVID-19 outbreak, and economic conditions have only worsened, with Italy and Spain especially hard hit by the virus.
The Purchasing managers’ indexes (PMIs) across the euro zone and Britain on Friday showed a slump in business activity.
The benchmark STOXX 600 ended Friday with its sixth weekly decline in seven as the health crisis stalled business activity.
Eurozone inflation remains low. The all-Eurozone indicator showed that inflation dropped to 0.7% in March, down sharply from 1.2% in February.
START TRADINGLQDFXperts – Weekly Forex report
The COVID-19 outbreak has paralyzed the global economy and led to sharp volatility in the currency markets.
The volatility continues for EUR/USD, which declined 3 percent last week, as the pair fell to the 1.08 level.
It was a relatively calm week for GBP/USD, which declined by 1.5%. The UK’s current account deficit narrowed significantly to 5.6 billion pounds in Q4, down from 15.9 billion in Q3. The Manufacturing PMI slowed to 47.8 in March, pointing to contraction. The Services PMI plunged to 34.5, down from 53.2 points indicating deep contraction in the services sector.
The British economy is struggling, and the outlook for the pound remains bearish.
Dollar/yen had its first quiet week since mid-February. The U.S. dollar has emerged as the primary safe-haven asset in the current crisis, as the yen has been forced to take a back seat.
It was a rough week for AUD/USD, which fell 2.7% last week. The pair closed the week just below the symbolic 0.60 level. As a risk currency, the Aussie has been struggling, as the COVID-19 crisis has sapped risk apprehension.
The Canadian dollar continues to show volatility, as USD/CAD climbed by 1.6% last week. The Canadian dollar reverted to its losing ways. The outlook for the currency is bearish, as low oil prices and the economic fallout have damaged the Canadian economy.
START TRADINGThe week ahead – Coronavirus slowdown hopes calm investors
In the upcoming week, investors await of theRBA Rate Decision, the US Unemployment Claims, the ECB Monetary Policy Meeting Accounts and the US inflation.
- On Tuesday (07.04) investors await for RBA Rate Decision. The RBA cut the cash rate from 0.50% to 0.25% on March 19, at an emergency unscheduled meeting. The bank is expected to maintain the cash rate at 0.25%, so investors will be keeping a close eye on the tone of the rate statement.
- On Thursday (09.04) focus turns to U.S. Unemployment Claims, ECB Monetary Policy Meeting Accounts and British GDP, for which the February estimate is a weak gain of 0.1%. Regarding ECB, at the March 12 meeting the central bank opted not to follow the Federal Reserve and Bank of England, so they and did not lower their main deposit rate, which is at -0.5%. Investors will be keen to read the details of the meeting provided by the minutes.
- On Friday (10.04) all eyes are on U.S. Inflation. Consumer inflation remains low in the United States and will likely fall due to the severe economic impact of the COVID-19. The headline figure has come in at 0.1% for two straight months.
Follow this week’s economic calendar.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, CNBC, FX street