Yesterday's collapse in global financial markets can be called "Black Thursday". It was the fears of the coronavirus pandemic across the planet that caused world stock indices to decline
It is difficult to say how it will all end, but it can be argued that the consequences of these events will continue to affect the dynamics of exchange-traded assets for a long time to come. The broad sales are based on expectations from investors that the global economy will slow down in its growth. The fears generated by the coronavirus will go to Europe, which turned out to be not at all ready to fight this plague. Therefore, open borders between countries will lead to the rapid spread of this infection if drastic measures are not taken.
In general, we believe that the chaos in the markets will increase or decrease depending on the dynamics of news on the topic of the coronavirus.
The currency exchange market reacts to the panic surrounding the coronavirus by continuing to decline in commodity and commodity currencies. And this is understandable, since the expected decline in global economic growth amid falling business activity and consumer demand causes a landslide drop in the quotes of oil and industrial goods - metals and the like. We believe that for this reason, the Australian, New Zealand, and Canadian dollars will remain under pressure.
On the other hand, significant support will be given to protective assets - government bonds of economically strong countries, safe haven currencies and gold. As for the dynamics of safe haven currencies, everything is not so clear here. The yen and the Swiss franc will traditionally increase. At the same time, the US dollar, as mentioned above, will develop in relation to commodity and commodity currencies.
Thus, an interesting situation will be observed in the euro / dollar pair. The strengthening of the single currency against the US is associated, first of all, with the growth of expectations of lower interest rates by the Federal Reserve at the March meeting. The second reason is the lack of clear signals from the ECB regarding the future monetary policy of the regulator. And another local positive for the single currency is the recent publication of generally positive economic statistics. The presence of these causes against the background of panic around the coronavirus can locally support the course of the Eurocurrency.
Forecast of the day:
The USD/JPY pair continues to decline on the wave of investors withdrawing from risky assets. The price is testing the level of 108.85, the breakdown of which will serve as the basis for the further decline of the pair to the level of 107.85.
The NZD/USD pair is trading below the level of 0.6250 amid falling demand for commodity assets. We believe that fixing the price below this level will become a reason for a further decline in prices to 0.6150.
