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The US dollar will experience a short-term weakness in the coming sessions. The increasing number of unemployed people in the US coupled with the rising prices of crude oil, the US economy will be in distress. Yesterday, the US EIA announced that inventory went down to its lowest level since the third of January. Record shows inventory build up plummeting by 0.745 million barrels. This was a huge decline from last week’s 4.590 million barrels inventory. However, the surge in the prices of crude oil will only weaken the US economy as unemployment in the country reaches 14.7%. However, investors are advised to be cautious as the fourth phase of US fiscal stimulus might be released soon, increasing the volatility in the pair. As for Brazil, the government expects the country’s annual GDP to plummet by 4%, the biggest fall since 1900. The revised outlook weighs in the coronavirus pandemic and a standstill negotiation with the EU.
The Romanian leu is on the verge of a disaster after it published its Industrial Production report yesterday, May 13. Bucharest’s industrial production figure hit the lowest level since reporting began in 2006. The decline was attributed to the deadly coronavirus wherein most countries were forced to lock down their borders in hope of containing the virus. As a result, economic activity around the world plummeted and it was up to the government to try to counter the economic threat of COVID-19. As for Romania, it just lifted several restrictions to its city with the highest number of coronavirus cases. However, analysts expect the country’s economy to experience weakness for the meantime as figures for April reports were just starting to be published. Nevertheless, investors should expect a slight recovery in Romania’s currency in the coming months. Meanwhile, the intervention of the US government and its central bank to its economy will help buoy USD.
Norway, home to the biggest sovereign wealth fund in the world, has started using several monetary tools to save its economy. First, the country slashed 150 basis points of interest rate for the past two (2) months to encourage economic activity. The country is now sitting at zero percent interest rate. However, the country’s central bank reaffirmed that it will not go to the negative territory in the future. This statement is logical as Norway started to cash out from its sovereign wealth fund. The country recorded a $41 billion withdrawal from the oil fund during the coronavirus pandemic. Meanwhile, the European Union is facing backlash from its member states as the heads of the largest trading bloc failed to ease the EU economy. The European Union only introduced a $500 billion aid fund to help its member states keep their economies afloat. Collectively, the EU is the second largest economy in the world next to the United States.
The Hungarian forint will see its value to further diminish in the coming sessions. This was amid the announcement made by the European Commission where it expects Hungary contracting by 7.0% on its annual GDP for 2020. In April, the International Monetary Fund (IMF) said contraction in Hungary will be at 3.1%. The revised outlook on Hungary’s gross domestic product will trigger a sell-off in the currency. Meanwhile, the de facto leaders of the European Union, Germany and France, are expected to make extreme measures to preserve the integrity of the euro. Aside from this, several restrictions on EU member states have already been lifted, increasing the prospect of sharp recovery in the coming months. This, in turn, gives hope among investors of the single currency that it will continue to outperform the global market in the coming session. The increasing tension between the United States and China is also pushing investors to hold the single currency.
- Trading Instrument