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Investors in the US and Europe do not seem to be concerned about the coronacrisis and worsening economic data. In addition, US shares are still performing significantly better than most European shares. Do political developments suggest persistent higher investor confidence in US than in European markets this year?
The global economy has been dealt a shock by the coronavirus, and central banks have not been able to push up inflation and interest rates to the extent where sufficient buffers are created to cope with a crisis. Will monetary authorities and policymakers succeed in finding a way out and, if so, will they be able to do so without inflating very risky asset market bubbles?
Most FX analysts expect EUR/USD to strengthen due to, among other things, declining interest rate differentials. However, there are good reasons to believe the consensus is in for a surprise. In this week’s FX report, we explain why.
In case the corona virus affect other countries and will cause more economic harm worldwide, it will become important how much latitude central banks and government have to stimulate economic growth. The US, the UK and Switzerland have relatively more options than Japan and the EMU countries. These differences will increasingly steer fluctuations in the currency markets..
We still expect long-term interest rates to increase significantly over the longer term due to expanding budget deficits which will be financed by central bank money printing. However, the corona virus has pushed back this forecast a bit. In this publication, we explain why and what the expected impact is of the corona virus and central bank policy on long-term interest rates in the coming months.
The coronavirus has been dominating financial markets. Will central banks and governments come to the rescue and make sure that the markets and world economy will only be hit temporarily? Or does the crisis mark the start of a bear market?