Forex
Asian Economy and Forex Market Crippled by Virus Spread
- Japanese Yen in critical struggle
- South Korean exports also slump
- USD safe haven the preference for most
As the week began, many had thought and hoped that the ongoing battled waged in China against the Coronavirus was beginning to settle down. Markets continued to operate with no major downturn as Beijing appeared to be controlling the situation well. The economic situation in China sees no major change, but that of its neighbors in the Asia Pacific region has been turned upside down as we near the weekend. Two deaths in Japan and a surge in cases from neighboring Korea have suddenly thrown the region into a very difficult economic position.
Japanese Yen and Economy Fighting a Battle
Typically a renowned safe haven in times of trouble, the Japanese Yen has endured its worst 4-day run in more than 2 years. The currency which is usually notoriously stable, has shed more than 2% in this short period. Prior to a slight rebound in today’s market trading, a sense of panic could be felt among traders. This fall is of course related to the current situation and compounded by how the virus has hit both trade and tourism.
Fears of a recession are high, with even David Bloom the head of FX at HSBC commenting that “New Coronavirus cases in Korea and Japan have given people cold feet regarding Japan and the Yen as a safe haven”. This certainly appears at least for the moment, to be true.
South Korea another Victim
The most notable spike in virus cases within recent days has come from South Korea. Cases there have almost doubled in just a 24 hour period. This, alongside comments from the director general of the WHO about how cases could see a further sharp increase have seen Korean markets down almost 1.5% overnight.
Traders and the wider public will certainly hope that the director generals words do not ring true, although the country have already noted a severe drop off in exports to China for February thanks to the disruption of supply chains. South Korea can play a key linking role in the region and so, it is no surprise to see the market react in such a way with the surge.
USD the Choice for Many in an Uncertain Market
With confidence low in the JPY ability to act as a safe haven at the moment, the USD has gained some strength in this regard. The currency has continued to trade steadily in a positive manner throughout the crisis as traders put their faith in the greenback.
This trend is expected to continue at least until the virus fears begin to subside. Quite when that will be though, and what damage will have been done to the world’s economy by that time, few can estimate.
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- Rate has doubled from Previous Weeks Record
- Record High is worse than Analysts Predicted
- EUR/USD Slides Again as Oil the Only Positive
US unemployment rate figures just released make for very grim reading. A hammer blow to start Thursday, the figures show that more than 6.6 million Americans filed for unemployment benefit amid the ongoing COVID-19 crisis. These numbers more than doubled the already unprecedented record of 3.3 million jobless claims from the previous week. The market has been somewhat slow to react to this news, but remains poised for the jobs report to be released later today.
New and Unwanted Records Being Set
Last week’s unemployment numbers of 3.3 million were far beyond the previous record high set in 1982. The number was almost 10 times greater than that set almost 40 years previous. The new weekly number from today puts that even further into the shadows. These are unprecedented times of difficulty throughout the US and global economy which show little sign of let up at present. At the time of writing, the Dow Jones was trading 150 points lower on release of the news which sees more than 10 million people in the US now filing unemployment claims in the past two weeks.
Some solace can be found in the fact that the latest $2 trillion stimulus package has made it easier for workers who have been furloughed in the crisis to remain on unemployment benefit, and also expanded the scope of those who could apply for the benefit. The previous high of 695,000 claims in 1982, and the 665,000 during the previous financial crisis of 2009 now seem miniscule by comparison.
Numbers Outpace Expert Prediction as Euro Falls
Analysts had predicted that numbers would should a marked increase. The results though, have gone far beyond even what the most pessimistic of onlookers imagined. This movement looks set to continue with more labor data to come on Friday. This government data release is set to show more huge losses across the board.
The forex market impact is already being felt as the EUR/USD market fell back below the $1.09 mark. The currency pair had worked hard over the previous week to build back up significantly, but on release of more negative data from the US, it has given way to the continually increasing safe-haven role of the greenback.
Oil Rebound Provides Glimmer of Positivity
At the opening bell, the one positive to garner from the start of the day comes from the news that the price war between Russia and Saudi Arabia may be nearing an end. Prices rallied across the oil markets more than 10% on these hopes. Nothing has been ruled out and there hasn’t been any concrete word besides an offering on Wednesday from US President Trump that the two sides would “work it out” in the coming days. This news would appear to have some truth behind it and has bolstered the market from record low levels.
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- JPY Posts Steady Gain to Start the Day
- Other Asian Markets also boosted
- COVID-19 Cases Increase to Make US Global Leader
Currencies and markets in Asia got Friday trading off to a positive start. Figures coming from Tokyo saw inflation easing to 0.4% for March. This, and the news that US cases of COVID-19 have now surpassed those of China, helped strengthen the JPY which has posted gains of more than 1% on the day against the US Dollar. Both the NZD, and the AUD, often traded as a proxy for the Chinese Yuan also posted increases.
This comes as confidence starts to return to the Chinese market, even though Beijing has now temporarily closed the country to all foreign visitors to prevent the spread of imported virus cases.
USD/JPY Improving From Low Point
Gains from the Japanese Yen against the USD during the Asian trading session on Friday have brought it back from a several week low point. Although the currency still remains under some strong selling pressure, this has been lightened by positive data released from Tokyo, combined with an easing of the USD safe-haven status from what it had been in the previous several days.
The JPY itself is a well-known currency that traders usually move to during times of uncertainty, though this had been rocked in recent weeks with the market turmoil present across Asia and the world. Stimulus hopes though, particularly in Japan, as PM Shinzo Abe prepped a $135 billion package for approval, have managed to thoroughly boost trader confidence. The Nikkei bounced back with a gain of almost 20,000 points Friday to reflect this.
Positive Ripple Felt Across Asia
While Japanese markets posted some of the biggest gains, there were rallies across the region. These extended to Shanghai and Hong Kong both posting positive numbers as the Asian economy looked to regain stability following a torrid period. Analysts are predicting a further push from these markets next week as they look to get ahead of US markets that are currently predicted to open lower after large gains on Wall Street yesterday.
The continuation of this positive trend will likely hinge a lot on news coming from China in the coming days and into next week as it continues to get back to work following the protracted shut down.
US Markets May be Shaken by Increased Case Numbers
With news coming today that the number of US COVID-19 cases has now overtaken that of China, traders wait to see how both the stock, and forex markets will respond. Traders were not deterred by huge unemployment numbers posted yesterday, but experts are predicting a slowdown to end the week with markets projected to open lower.
This comes after a significant rally saw the S&P 500 climb more than 6% yesterday. This could also prompt a further move away from the USD as traders look to other options for safety.
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- Huge Economic Stimulus Package Approved
- Confidence Unmoved by Stricter UK Lockdown
- Prince Charles Coronavirus Diagnosis Could Shake GBP
News that the Senate has agreed upon a huge stimulus package to provide some much needed relief to the US economy was greeted positively at the opening of today’s markets. The GBP/USD continues its rebound, surging to 1.19 on release of the news. This is a good start to a busy day for the pair which could see movement on the release of a host of data. These numbers include inflation, and Retail Price Index numbers from the UK as well as Durable Goods Order data from the US.
Package Approval Met With Huge Market Increases
Maintaining context important, and on that front, global markets have been suffering greatly and at multi-year lows during the present crisis. Still the news of Senate approval for the economic measures proposed, brought positive reaction throughout the markets. The Dow Jones posted its biggest one day gain since 1933 and the Great Depression. It was up 11.4%.
Similar numbers were being posted across the world, with the Nikkei in Japan closing 8% higher on the news. Analysts are taking nothing for granted and warning of further bounces ahead, but it is some of the first positive news in weeks, though the US still faces up to the reality of growing virus case numbers across the nation.
Tightening of Lockdown Does Little to Impact GBP
British PM Boris Johnson on Monday moved to further tighten lockdown restrictions in the UK. This is a move that many feel is coming well over time, but still required nonetheless. He instructed the closure of all non-essential businesses, and provided increased powers to police to disperse gatherings among a range of other measures.
This news surprisingly did little to move Sterling from what was already a precarious position. Much of this may have been due to the fact that the market had already “bought the rumor”, and was in position expecting the inevitable news. Still, much of the increasing GBP market today stems from improved trader confidence in the US to move away from the safe haven USD slightly. This is a position which could still certainly change given that the US still seems a long way from flattening the COVID-19 curve.
Prince Charles Virus Diagnosis Could Rock Market
With the markets virtually ignoring much of the data released in recent days and weeks, instead moving largely on sentiment around the COVID-19 spread, news just released could prompt a further weakening in the GBP. Heir to the throne in the UK, Prince Charles, has just been diagnosed with coronavirus. He is said to be displaying only light symptoms, though it is certain to ignite concern for other members of the Royal Family, including the Queen.
It remains to be seen how the GBP forex market will react to this news, but it is certainly another factor which could work to further disrupt the market confidence.
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