Once again COVID19 fears grip the markets as the total number of cases now looks shortly set to rise above 1million. The recovery in equity markets we saw towards the end of last week has not continued this week with all the major global share markets finding sellers into last weeks strength. The main focus of the financial market now is how long until the world recovers and gets back to work? Remember that this crisis is primarily a medical one and a medical solution (cure or treatment) will quickly turn this crisis around. Until then it is still uncertain how long this will continue.
Key events from the past week
USD: Dollar Strength, Monday, March 30. As expected the USD was strong at the start of the week enjoying safe haven flows. Remember, that in the present COVID19 crisis the USD acts as a safe haven currency alongside the JPY and the CHF.
• US Oil: Has US oil bottomed, Thursday, April 02. US oil put in a recovery on Thursday of this week as China announced plans to top up its strategic oil re-serves. Oil hit $22.50 for an increase of 17% from Monday’s 18 year low of $19.25 per barrel. Will this $20 a barrel level prove to be a bottom in oil prices?
• US employment: Non Farm Payroll, Friday, April 03. A major market concern is US employment levels. Recent US employment data is showing record levels of unemployment. Any recovery post COVID19 is going to be slow. Non Farm Payroll data will be important this Friday in further highlighting US job losses.
Key events for the coming week
USD: Long live the dollar, All week. If we get further unwinding of stocks and equities this results in more cash positions. The USD is the most liquid currency, so if equity markets fall again next week we can expect more USD strength again in the coming week.
JPY: Safe haven bids, All week. The CHF and the JPY are typical safe haven currencies that investors buy in times of crisis and uncertainty. As long as equity markets remain pressured, expect JPY and CHF buyers on pullbacks.
Coronavirus: Watch out for the latest virus news. This week President Trump alarmed the market by saying that the US are heading into a ‘rough’ couple of weeks. If the virus spread accelerates faster than expected there will be further selling in the S&P500, UK FTSE100, and HK50 next week.