In general, the markets have been in a better mood and have been more prone to favor riskier assets since several countries announced that they were going to begin lifting up the restrictions they had to impose due to the advance of the coronavirus outbreak.
In general, the markets have been in a better mood and have been more prone to favor riskier assets since several countries announced that they were going to begin lifting up the restrictions they had to impose due to the advance of the coronavirus outbreak. The expectations for treatment against the virus also fed risk appetite, which in moments like these doesn't favor the dollar, as it's perceived as a safe haven currency.
Another factor that analysts mention is that markets are confident that the Federal Reserve and the Treasury Department will continue providing economic stimulus in order to boost the US economic performance, which has been heavily affected by the advance of the pandemic. In fact, the Fed recently pledged to continue monitoring economic data and to use any available tool to aid the economy.
At the moment, the United States is the most affected country by the novel coronavirus, with 1,160,838 confirmed infections and a death toll of 67,448. The US first-quarter GDP shrank by 4.8 percent, the biggest contraction since the 2008 financial crisis, mostly driven down by a sharp fall in consumer spending, exports, inventories, and non-residential fixed investment.
Consumer expenditure plunged 7.6 percent as most non-essential stores (like restaurants) had to close down, exports fell down by 8.7 percent while imports fell 15.3 percent. Markets also learned that ISM's manufacturing PMI dropped to 41.5, higher than expected, though signaling a contraction in the manufacturing sector.
“The coronavirus fear, the social distancing measures, the financial volatility and plummeting confidence have taken a severe toll on consumers’ ability and willingness to spend,” explained an analyst at Oxford economics.
The government decided not to extend its social distancing guidelines so the circumstances point to an attempt to reopen the US economy. According to ABC News, the US President Donald Trump plans to do so through the implementation of a three-phase plan, which would give priority to "essential" economic sectors and apparently would push for some social distancing measures through the summer.
There are, of course, fears associated with this attempt. For example, many think that it may be too soon to implement those measures, especially given the current dire situation. On the other hand, there are some who argue that keeping the economy closed is not sustainable, especially on an election year.
President Trump has also taken advantage of the situation to continue waging an ideological war against China. The president suggested that the coronavirus may have originated in a Chinese laboratory, though refused to give details about his claim. There are also reports about the White House planning on imposing tariffs as a retaliation mechanism, which would put in risk the phase 1 of the Trade Deal that was signed earlier this year, a move that Wall Street may not favor.
“Yes, yes I have,” answered Trump when asked whether he has seen evidence that confirms the idea that the Virus comes from the Wuhan Institute of Virology, though he declined to give specific details, claiming that he is not allowed to do that.
As per the future, the upcoming week will see labor market data from the United States, New Zealand, and Canada. The expectations for major job losses in North America may put pressure on the US dollar. At the moment, what we know is that US jobless claims rose to over 30 million, which suggests a significant plunge in the official unemployment indexes.