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The market is cheering over plans by US President Donald Trump to reopen the American economy soon. This was following the slowdown in coronavirus related deaths in the country which now tops 23,000. This figure is now the largest in the world. The US has also the largest number of coronavirus cases in the world. Despite this unfortunate news for the American economy, the US government and central bank were able to calm investors. Trump signed a $2 trillion stimulus package while the Fed introduced the largest economic aid in the world at $2.3 trillion.
Third world countries, on the other hand, are having a tough time buoying its economy. South Africa will suffer a triple blow to its economy as lockdown in the country was extended until the end of the month. An economist warned that the local economy might shrink up to 23.5% in the second quarter as coronavirus hits growth.
The US dollar will regain its footing against the Russian ruble. This was following the call between US President Donald Trump and Russian President Vladimir Putin. Analysts see the oil agreement between OPEC and its allies as Russia’s concession. Three (3) years ago, Russia led the production cut to boost oil prices along with OPEC. This drove a wedge between the US-Saudi relationship. It successfully established itself as a player in the oil market.
As the world enters uncertainty due to the coronavirus, Russia is playing a game with OPEC once again. Despite agreeing on oil production cuts, Russia turned away from its promises and continued to drill oil. The oversupply in the global economy causes the oil price to plummet to its 10-year low. On the new agreement between OPEC and its allies, Russia agreed to cut 2.5 million barrels per day, which is four (4) times higher than what Russia was originally offered back in March.
A dire warning was given to India by the World Bank. The global institution said India’s annual GDP growth will slow down between 1.5% to 2.8%. This figure will be the lowest growth in the country since the 1991 Asian crisis. A Japanese brokerage firm further give details to India’s second quarter GDP outlook. The firm said the country might contract by as much as 6% in Q2. This announcement had investors and traders withdrawing from their buy position on the Indian rupee.
Meanwhile, the US was able to ease investors after it introduced liquidity in the market. The US government unveiled its $2 trillion stimulus package. The Federal Reserve, on the other hand, matched the amount and introduced a $2.3 trillion aid. With the government and central bank on their back, US businesses would be more confident in doing business in the country. Furthermore, the price war in the oil market has made Asia an unlikely market for investors.
Central bank governors are leading figures during the coronavirus pandemic. In the US, the Federal Reserves beat the US’ government’s stimulus package of $2 trillion after it unveiled $2.3 trillion aid. This is the largest fiscal stimulus around the world to date. However, Canada is having trouble as BOC’s president is set to leave the institution following the expiration of his 7-year term.
This will force Prime Minister Justin Trudeau to look for the central bank’s successor. However, this might be tougher as the successor needs to have a grasp of the ongoing situation in the global market. The Bank of Canada already slashed 10 basis points just last month to counter the economic effect of the coronavirus. The country’s interest rate now sits at 0.25%, leaving Canada with fewer options and ammunition to further ease the market. The United States, on the other hand, can print more money as demand for the cheap dollar continuess to surge.
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