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The safe-haven appeal of the Swiss franc is back as the rest of the region continue to ease their lockdown restrictions. In March, the World Health Organization (WHO) named Europe as the epicenter of the coronavirus pandemic. The announcement caused panic among investors, which prompted a selling pressure for European assets, including the British pound and the Swiss franc. As European countries began to lift their lockdown, investors are expected to flock back in the region. The recovery is expected to be robust as renewed tension between the United States and China pushed investors to find a stable business and investment location. However, not all countries in Europe are expected to benefit from the cold war between Beijing and Washington. The UK has now the largest coronavirus cases in the European region. The pandemic and its divorce from the EU this year is expected to take a toll in the country’s economic performance.
The European Union and its member states posted a disappointing figure for their April reports. Meanwhile, Australia managed to deliver a positive result this month. However, analysts are expecting a different result for both the European Union and Australia once they publish their figures next month for the month of May. With the European region finally getting back on its feet, a robust economic recovery is expected next month. Investors are already gaining position on the single currency as its value was currently at its lowest in years. On the other hand, currency traders are still pessimistic on the Australian economy. Fitch Ratings recently adjusted its outlook on the Australian economy to negative. The credit rating agency expects the second quarter economic growth of Australia to plummet by at least 5%. The Australian government already unleashed a $127 billion stimulus, which represents 10% of the country’s GDP.
The renewed tension between the United States and China could slowdown the economic recovery in Europe. Countries in the European region are now starting to lift their lockdown restrictions as some had successfully flatten the curve of their coronavirus cases. However, the uncertainty brought by the new trade war between Beijing and Washington could derail the recovery plan by countries in Europe. This would be a danger sign for the largest economy in Europe, Germany. Berlin is currently experiencing recession brought by the coronavirus pandemic. Analysts, however, reaffirmed a robust growth for Germany in Q2 as the country began to reopen its economy. But an economic cold war between the two (2) largest economies in the world could derail this and put the world in peril. The US, on the other hand, will remain strong, thanks to the US dollar. The US government and its central bank will continue to support the US economy.
The Japanese yen will see its value continue to plummet as its government eyes more fiscal stimulus to help the economy recover from the coronavirus pandemic. Japanese Prime Minister Shinzo Abe is considering injecting another $930 billion stimulus to the economy. In April, Tokyo had its largest stimulus package in history at $992 billion. Combining all stimulus introduced by the government due to the coronavirus pandemic will total to almost 50% of the country’s annual gross domestic product (GDP). Just like Japan, the United States is also doing its best to save its economy. In the US, its government and central bank had cumulatively injected $6 trillion on its economy. The world’s largest economy and third-largest economy, the United States and Japan, are currently in recession. With Japan currently facing recession, investors are expected to lose faith in the yen as a safe-haven currency.
- Trading Instrument