On Wednesday, the situation in the currency market did not change much. The attention of the market continued to focus on the impact of coronavirus on the global economy. In general, on the American economy, along with the Chinese economy in particular. The Central Bank of Canada continued the measures proposed by the G7 to stabilize the national economy. Following the Fed, the regulator cut the key interest rate immediately by 0.50%, from 1.75% to 1.25%. However, the Canadian dollar did not particularly react to this, and only increased its intraday volatility.
According to the results of the day, the US stock market reacted with rapid growth to the result of the super Tuesday at the primaries of the Democratic Party, where J. Biden broke into the lead.
In turn, investors actually ignored the publication of important production indicators, business activity indices in the services sector in Germany, Britain, the eurozone and the USA, which showed a decrease. Thus, we can say that they are no longer surprised by the negative trends in the economies of the leading countries against the general background of a slowdown in global economic growth. The focus of the market is now on the monetary policies of the world Central Banks, as well as the expansion of incentive measures from them.
On the other hand, the Fed's "survival" race began actively this week, significantly lowering interest rates. The Canadian Central Bank rushed after it. We expect the RBA and the RBNZ to also lower borrowing costs. The only question remains, will the ECB take any measures? In fact, the European regulator has nowhere to cut interest rates, which are already in negative territory, and the choice of bonds for purchases is not so wide.
Among the main currencies on Thursday, only the Australian and New Zealand dollars receive local support. The impulse was the growth of stock markets in the Asia-Pacific region, which is in the wake of the IMF's decision to allocate $ 50 billion to fight the coronavirus.
Assessing the general development of the situation in the markets as a whole and in the currency market in particular, we believe that the main currency pairs will move in the side ranges with sharp price hikes against an overall high volatility background. We have previously pointed out that the weakness of the dollar due to signals about the slowdown of the US economy, and then the Fed's decision to significantly lower the level of interest rates will be balanced by similar actions by other world Central Banks in relation to competing currencies. Therefore, we believe that the general side trend in the main currency pairs will continue in the short term.
Forecast of the day:
The EUR/USD pair is moving in the range of 1.1095-1.1180. We expect that this dynamic will continue today.
The price of gold continues to balance in the range of 1631.50-1651.00. Its growth above the upper border can lead to 1688.15. On the contrary, declining below the level of 1631.50 can lead to the continuation of fall to the level of 1611.00.
