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The integrity of the EU and its currency is in question. This was amid the failure by the finance minister from each member state to agree on the EU funds to counter coronavirus. In addition to the economic threats of COVID-19, the 2 largest economies in the EU are also facing slowdown in their local economies. Germany and France are expected to enter a recession once they publish their first quarter GDP growth. Analysts expect the recession in these countries to infect other EU member states as well. This is evidence of an impending recession in the European Union was Germany’s report for imports.
Figures showed Germany contracting in March which might be the same case with other members of the EU. This means less usage of the euro currency for transactions. The largest trading bloc in South America, on the other hand, will benefit from the strength of the real. Brazil’s Consumer Price Index (CPI) posted positive a figure for March.
The US dollar will continue its winning streak against a basket of major currencies. The $2 trillion stimulus package by the US caused the value of the dollar to plummet. However, investors and traders are waiting for this as they prefer cheap dollars. Reports also suggest that the US Government and the US Congress are now planning with the phase four stimulus package. This will further increase liquidity in the market. On the other hand, increasing liquidity in other economies will only cause their currency to lose value as investors will opt for the global currency, which is the US dollar.
The positive reading in Brazilian reports will be overshadowed by the luster of the greenback. In other news, the Brazilian government slashed its outlook for 2020 GDP to zero. Analysts expected economies to further suffer in the long run until coronavirus cases around the world subsides. Medical experts believe the situation will continue until the end of the year.
An analyst slashed Romania’s 2020 GDP growth to negative 6.6%. The figure is one of the largest declines in the European region. Forecast for the largest economies in the European Union also looks grim. Analysts gave an optimistic growth for Germany and France with a negative 4% GDP growth. Countries in the European Union are now trying to salvage funds to help its members weigh down the economic implications of the coronavirus.
In Romania, the government is now trying to come up with a second stimulus package. However, investors in the country are not content with government’s efforts. Romanian investors are asking the government to create a budget of €30 billion or 15% of the country’s GDP to help their businesses. They further warned that the local economy could collapse soon if the government fails to implement this stimulus. On the other hand, the US unveiled the largest stimulus package in the world.
The single currency has taken a complete inverted V-turn against the Norwegian krone. As the US and Russia held talks with regards to crude production, oil producing and oil dependent countries revitalized. In March 08, Russia and Saudi Arabia led OPEC (Organization of the Petroleum Exporting Countries) were in a price war following their failure to agree on oil production cuts. Cutting the production was supposed to help oil-producing countries to recover from the recent plunge as the world turned their heads toward sustainable energy.
Norway is one of the largest oil-producing countries in the world. Its $1 trillion sovereign wealth fund was built on oil. The talks between President Donald Trump and his Russian counterpart Preside Vladimir Putin made oil investors and traders optimistic. This means that crude oil prices are expected to recover in the coming sessions, which will be beneficial to the Norwegian krone.
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