Coronavirus Impact on the Economy and Forex
The coronavirus outbreak appeared first in China and since then, it has infected almost all the countries across the globe. It has created a devastating effect on businesses and the economy around the world has taken a great hit.
Coronavirus impact on stock markets
The stock markets are witnessing big shifts. Investors fear that the coronavirus spread will destroy economic growth worldwide and governments might not be able to stop this decline. The FTSE, Nikkei and the Dow Jones have faced huge falls since it’s outbreak.
In a response to the fear amongst citizens, central banks of several countries have slashed interest rates. This move should, theoretically, make borrowing cheaper and thus encourage spending in order to boost the economy.
Despite all the measures taken by the governments of the various nations, few analysts believe that the major stock markets could remain volatile until the coronavirus pandemic is contained.
Besides this, unemployment in developed counties like the US is rising quickly. That in itself signals an end to the expansion of world’s largest economies. Oil prices have also crashed to an unexpectedly low level. Due to all these factors, several advanced economies are facing a threat of recession.
Coronavirus impact on Forex market
The continuing spread of COVID- 19 across the globe is directly impacting the global foreign exchange market.
Understandably, the Forex market of China took the first hit as the news of virus outbreak went global. It also impacted the Australian dollar quickly as Australia is China’s largest trading partner. Their currencies faced a great decline over the fear of unstable markets.
With coronavirus heading to European countries, the EUR faced a downward trend. Moreover, the economic safety measures against the coronavirus were quite slow which shook the investors’ confidence in sterling. Amid the uncertainties, the investors started selling off sterling and as a result, its value came down.
Despite the initial reluctance of the United States to take early measures to prevent the spread of COVID- 19, the US dollar has still remained the preferred choice of investors. The dollar has historically been believed as ‘currency of last resort’ and it has actually helped to preserve its value to investors.
However, in the coming few months, the realities of the virus outbreak will definitely impact their economic and medical stability and a recession is sure to hit the US soil hampering the recovery of the entire global economy.
Learn risk management with Risk Calculator and trade successfully
However, in spite of the current uncertainties surrounding the economy and the forex markets globally, still there are opportunities to trade successfully.
Though trading in these times of volatility can be unpredictable and stressful, we need to learn to trade profitably and earn money in a smart manner.
Before entering any trade, it is always advisable to work out your lot size and risk to avoid losses. You can calculate risk management on our Risk Calculator created by us for MetaTrader. It saves you from the confusing and time consuming process of using a spreadsheet or a calculator to calculate your lot size. It also eliminates the risk of human error, and allows you to focus completely on your entries.
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