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The US dollar is in for another wild ride in the coming sessions. This was following the massive increase in US crude oil inventories in yesterday’s report. Furthermore, the country is set to report initial jobless claims today, April 16. Analysts were expecting a record-breaking figure as the coronavirus pandemic marked its first month.
The US government and the Federal Reserve earlier introduced their own stimulus package to aid the economy. The government had a $2 trillion package while its central bank recorded the highest stimulus in the world’s history at $2.3 trillion. However, the collapse in crude oil prices could push the government and the Federal Reserve to further increase liquidity in the market. Canada, on the other hand, retained its 0.25% interest rate in yesterday’s meeting by the BOC. This was to help CAD buoy in the market following disappointing figures for key reports and from the 100 basis points cut by the BOC in March.
A dire warning was given by analysts to AUD investors and traders after several reports show reversal from its current trend. Australia’s employment change was recorded at 5.9K, which is way higher compared to the -40.0K expectations. However, the figure was a massive drop from the previous record of 26.7K. Meanwhile, the unemployment rate was lower than initially expected, but higher from what was previously recorded.
Analysts, however, said that the full-blown impact of the coronavirus hasn’t materialized in Australia yet. They added that next month’s result could be catastrophic. This was due to the decision by the Australian government to further extend its lockdown despite its successful campaign to contain the virus. US President Donald Trump, on the other hand, is working towards reopening the US economy by May. This was after coronavirus hit American businesses, causing the price of US stocks and indices to plummet.
Bank of Canada (BOC) holds onto its current benchmark interest rate of 0.25%. This was following its simultaneous cut in March where it saw 100 basis points slashed from its rate. In February, the country also cut 50 basis points from its interest rate. Analysts saw last March’s move as a precautionary measure to what might be a catastrophic year for Canada. The country was able to dodge pressure from central banks around the world to cut rates amid the US-China trade war in 2019. However, as coronavirus not only affects businesses, Canada made an unprecedented move to help businesses and its citizens through the rate cut.
On the other hand, Australia might have a hard time dealing with the economic impact of the coronavirus compared to other countries. The country already slashed its rates during the tit-for-tat war by the US and China. This means that the country has fewer options to counter the next economic crises.
The appeal of the safe-haven currency is shining against the Australian dollar. Switzerland was among the only three (3) countries in the world with a negative interest rate. This means that Switzerland is paying businesses to borrow money from the bank, thus a haven during times of crisis. The country took the spotlight after Europe became the center of the coronavirus pandemic. Its appeal increased further due to the disappointing reports from the G20 economies.
Australia was among the countries heavily hit by the pandemic. The country was recovering from the US-China trade war prior to COVID-19. Analysts warned that the deadly virus could prolong the economic recovery of the country until 2022. This forecast by analysts doesn’t include the potential extension of lockdown in the country. Despite flattening the curve, the Australian government is wary on the second wave of the virus, thus leading to an extended lockdown.
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