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The safe-haven appeal of Swiss franc is shining throughout the market. Disappointing results from major reports of advanced economies are pushing investors to seek comfort with safe-haven assets. Last week, Australia published its Services Purchasing Managers Index (PMI) report which shocked investors. Figure showed the country scoring only 39.8 points, which is much lower from the 48.4 points in the 3rd week of March. The disappointment from investors came from the inability of the Australian government to offset the effect of coronavirus. The deadly virus has pushed the Reserve Bank of Australia (RBA) to cut its benchmark interest rate by 50 basis points to 0.25%. A new report from the OECD (Organisation for Economic Co-operation and Development) suggests that Australia’s economy might be hit up to 22%. This led to investors abandoning the Australian dollar in the previous and coming sessions.
The United Kingdom is weighing down the economic impact of the deadly coronavirus, at least for now. The UK Construction Purchasing Managers Index (PMI) was able to expand to its highest point since March 2019. Meanwhile, Britain was able to beat expectations for its Manufacturing PMI. Figure showed the country scoring 47.8 points for manufacturing, which is higher than the 47.0 forecast. However, investors are worried that the UK might have reached its economic peak. Countries in Europe are expected to enter recession once they officially published their GDP growth rate for the first quarter of 2020 this month. This was amid the coronavirus outbreak in Europe. Meanwhile, health experts in the United Kingdom believe that the increase in the number of cases is just starting out. Yesterday, the daily coronavirus related deaths in the country exceeded 500. As the world cripples due to COVID-19, the value of the Swiss franc is flying.
The British pound will continue its winning streak against the Japanese yen. Last week, Japan posted a disappointing figure for its Services PMI report. The posted 32.7 points from the report suggest that the service sector in Japan was in contraction. In addition to that, foreign investors in the country have been lowering their asset holdings. Foreign investment in Japanese stocks was recorded at -$1,421.9 billion. On the other hand, they are increasing their holdings in the country’s fixed income assets like bonds. Foreign buying in bonds went up from negative $61.3 billion to just a mere -$1.7 billion. In the UK, on the other hand, investors are still buying financial assets with the hope that Britain’s economy will boom after it withdraws from the European Union. However, analysts warned that the current situation might reverse. This was after the UK reported the highest coronavirus related deaths in the country yesterday, April 01.
A move from Japanese Prime Minister Shinzo Abe will trigger a sell off in the Japanese Yen. Yesterday, April 01, Abe unveiled its record-breaking stimulus plan to help the Japanese economy. The country’s ruling party proposed a ¥60 trillion yen or $555 billion US dollar package to aid households and businesses affected by the coronavirus. The amount represents 10% of the country’s gross domestic product (GDP). However, analysts warned that this might just be the start and they are worried that Japan is losing room for monetary easing. The country was among the only 3 countries in the world with a negative interest rate. On the other hand, the Bank of Canada (BOC) cut its benchmark interest rate by 50 basis points on March 27. Canada has only a 0.25 percent interest rate. Comparing Canada and Japan, it’s clear that Canada has more advantage and more ammunition to support the country’s economy against the deadly coronavirus.
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