Did the coronavirus outbreak have any effect on the foreign exchange market? – fingerlakes1.com
The number of new coronavirus cases reported in China over the past few days lets us believe that the outbreak is finally slowing and containment efforts are rewarded. The sad truth is that the coronavirus outbreak is showing little signs of slowing down. It’s believed that the situation will only get worse and nations need to prepare accordingly. The new coronavirus won’t become an epidemic, but conditions for people around the world aren’t getting any better. Until this point, the impact on the foreign exchange market, i.e. Forex, has been fairly limited. Nevertheless, when the situation worsens, the economic impact will be noticeable.
What commodities are affected by the coronavirus outbreak?
The largest producer and consumer of commodities is China. In case you didn’t already know, it accounts for 16 percent of total oil demand and 50 percent of total copper demand. China’s iron ore demand has risen to approximately 70 percent. The health emergency is reshaping the commodities market, rapidly increasing the demand for other economic goods and rising commodity prices. Chines companies have already canceled orders for crude oil and other commodities. Commodity currencies will become vulnerable if the economy continues to slow down.
The coronavirus outbreak poses a threat to the country’s economic activity. The International Monetary Fund draws attention to the fact that the Chinese economy will start declining fast, while other economies will grow at a rate of 1%. According to the experts at Bloomberg, the commodities market is down almost 8%. The limited business activity in China will continue to lower demand for raw materials and drive prices down. Central banks, as far as they’re concerned, adopt a cautious attitude with regard to the health emergency. They’re delivering more rate cuts. The Philippines and Thailand are the first examples that come to mind.
Dollar, yen, and gold are in high demand
The US dollar, as well as the Japanese yen, are now in high demand as the coronavirus outbreak intensifies. It seems that these currencies are the only winners. The concerns regarding the health emergency increased the demand for security. Numerous factors are supporting the dollar, such as the positive feeling about the US stock market and the guarantee that people in the country are safe and healthy. The euro, its key rival, is going through a tough time and there’s no bright spot to be found for the Eurozone any time soon.
Surprisingly, the fact that the US dollar is stronger than ever isn’t necessarily a good thing. It will increase exchange rates and American exports will, therefore, become less competitive. What is more, the Federal Reserve is forced to introduce bias in monetary policy decisions. We began this year expecting a weaker dollar and, right now, we’re complaining that the increase has surpassed expectations. The Japanese yen exceeded expectations as well, prices rising by roughly 0,2 percent. The exchange rates will continue to enjoy support. More and more investors are moving money into the Japanese yen.
Now, let’s talk about gold. There’s greater interest in assets such as gold, which is now priced at $1,579.50 an ounce. Important of the yellow metal surge, gold being sought for investment purposes and jewelry making. During these times of economic uncertainty, many individuals resort to investing in gold because of its unchallenged value. Buying gold may protect against the decline in the stock market. In China, the gold demand is expected to decline by 10 percent this year due to the coronavirus outbreak. The point is that the Chinese will be buying less gold.
Investors have a growing risk for appetite
Despite the current situation, investors aren’t afraid to trade in the foreign exchange market. As a matter of fact, it could be argued that they have an appetite for risk. The emergency situation didn’t have a profound effect on the trend of the Eur/USD or GBP/USD. To be more precise, the effects aren’t as strong as initially expected. We have witnessed negative effects concerning the Asian markets only. The optimal strategy to take advantage of in Forex right now is to embrace your fear and enjoy the ride. It’s not likely that something unfortunate will occur in the near future.
We don’t have an overall sense of the situation. This basically means that we can’t say for sure if the coronavirus outbreak has affected brokerages. It’s not the peak season, so it’s not possible to draw reasonable conclusions. People are looking for trusted Forex brokers to offer them easy access to the foreign exchange market and help them make money in the process. These people aren’t reluctant to examine Forex broker reviews or even speak to clients to inquire about the competence of the financial experts. The health emergency hasn’t scared off investors. Let these people serve as an example.
The improvement in the Forex trading game is considerably helping the market. Central banks don’t have any reason to impose tight monetary policies, which is ultimately a good thing. The coronavirus hasn’t been as detrimental as presumed. Some brokerages have actually benefited from this unfortunate situation. There haven’t been any declines regarding client engagement. Clients continue to register with Forex brokers and they actively make financial transactions. Finally yet importantly, the number of traded instruments has experienced a positive widespread.
The situation currently characterizing the world can be described as chaotic. Everyone is terrified that they will catch the pulmonary-like disease. Additionally, there is fear that the fatal virus will send ripples through the global economy. The foreign exchange market hasn’t had to suffer due to news or measures following the outbreak. Trading is something to look forward to. The coronavirus outbreak could go in any direction. The outlook isn’t positive, unfortunately, and this is because the spread of coronavirus isn’t slowing down. The fight against the fatal virus continues and there’s no way of knowing what harm it can cause to global economic growth. It’s hoped that it won’t cause a market dislocation because it has all the power to.
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