More and more governments have tightened lockdowns and now are planning further actions to support the already damaged global economy.
The numbers are astounding: $15 trillion has been wiped of world stock markets, oil has slumped 60% and emerging markets have seen their currencies collapse more than 20%.
Brent crude oil has fallen by 62% in the quarter to just $25 a barrel. Industrial metals like copper, aluminium and steel have all dropped 15-22%. Also, some agricultural staples like coffee and sugar are down 17% and 10%.
Economic activity came to a grinding halt, driving the biggest global market sell-off since the 2008 financial crash. Volatility and corporate borrowing market stress has spiked on worries that whole sectors could go bust.
What about safe-heavens? Are there any?
The dollar has rocketed against emerging market currencies. It had also shot up against the majors too, but has eased back over the last two weeks. However, the greenback will end the quarter only 2% up against those bigger currencies.
Dollar’s superpowers left the Japanese yen, the other traditional FX safe-haven, with only a 0.4% gain. The Swiss franc is down against the dollar, although it has climbed steeply against the euro and many other currencies.
The relentless spread of COVID-19 has forced entire countries to self-isolate and tightened lockdowns will be next month’s trend. G20 governments have promised a $5 trillion revival effort, major central banks have cut rates and restarted asset purchases.
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The CORVID-19 outbreak, the tightened lockdowns and the ongoing concern about the ongoing coronacrisis has led to sharp volatility in the currency markets.
EUR/USD had an excellent week, climbing 4.6 percent and breaking above the 1.14 level. The U.S. dollar was broadly lower last week, following a staggering figure for unemployment claims, which hit 3.2 million. The dollar continues to be a magnet for investors during the current crisis. Although the dollar did have an off-week, the outlook remains positive.
GBP/USD enjoyed an outstanding week, climbing close to 7%. The Bank of England maintained rates at 0.10% at its scheduled meeting, as expected. The pound took full advantage of dismal U.S. jobless claims, but investors will likely stick with the safe-haven dollar.
The Japanese yen rebounded last week, as Dollar/yen slipped 2.5%. The Japanese currency has been unable to capitalize on the CORVID-19 crisis, despite its reputation as a safe-haven in times of trouble.
There was finally some good news for AUD/USD, following previous weeks’ free-fall. The pair climbed 6.1% last week and crossed above the 0.61 level. However, as a risk currency, the Aussie is likely to face turbulence.
The week ahead – Tightened lockdowns prolong uncertainty
In the upcoming week, investors await of the manufacturing PMIs in China and the U.S, British GDP as well as U.S. nonfarm payrolls.
- On Tuesday (31.03) investors await for Chinese Manufacturing PMI, the UK Final GDP, the Eurozone Inflation and the Canadian GDP.
- On Wednesday (01.04) focus turns to US ISM Manufacturing PM which is expected to slow to 46.0 in the upcoming reading, i.e. contraction.
- On Friday (03.04) all eyes are on U.S. Employment Reports. Wage growth is expected to dip from 0.3% to 0.2% in March. Investors are bracing for a rare decline in nonfarm payrolls, with an estimate of -81 thousand. The unemployment rate, which was 3.5% in February, is expected to climb to 3.8%. Further, US ISM Non-Manufacturing PMIis expected later on the day. The services sector has looked strong, with the PMI continuing to post readings well above the 50-level. However, analysts are braced for a sharp slowdown in March, with an estimate of 48.0 points.
Follow this week’s economic calendar.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, CNBC, FX street