On Tuesday, markets were impressed by the news from the Fed and witnessed risk recovery. The US stocks futures rallied in tandem with the US Treasury yields while the Japanese indices gained over 7%. On the contrary, the DXY lost the 102.50 mark and declined further to the 102.10 region. Risk assets got boosted amid the improved market’s sentiment.
On Monday evening, the US Federal Reserve saying that ‘aggressive policy’ is needed to cushion the coronavirus damage launched the unlimited QE program. The Fed explained that it would buy an unlimited amount of the US Treasuries and securities to help smooth-running market functioning and efficient ‘transition of monetary policy’. The US Central Bank also intends to allocate $300bln in several lending programs to support financial markets. The decision weighed on the US Dollar and dragged it to the red zone.
For the first time in more than a month, the coronavirus headlines took a backseat as easing tendencies of the most influential world central banks finally yielded first results. Moreover, in China, where the pandemic started, over 90% of infected patients managed to recover and the number of cases there continues to drop. And though Europe is still in dire straits, the news that German Chancellor Angela Merkel’s initial coronavirus test came back negative brought some relief to traders.
As for the currency market, USD/CAD and USD/JPY lost some traction amid the weak USD and traded with daily losses in the 1.4402 and 110.90 regions respectively while AUD/USD rallied to the 0.5940 area. The Cable also moved higher towards the 1.1678 mark while the EURUSD pair steadied above the 1.0800 level and aims at mid-1.0800.
All in all, markets are slowly recovering from the coronavirus shock and returning to its normal functioning. However, the economic impact of the pandemic will be significant and even the best scenarios imply the reduction of the global GDP by several %. Some forecasts say that in the Q2 of the current year the US real GDP may shrink by 24%.
