Financial markets continue to be shaky
Rising unemployment in the USA
Oil price recovery
Financial markets continue to be shaky. News of coronavirus spread (on Friday the number of infected people in the world exceeded 1 million) and related problems in the global economy maintain high levels of volatility. There is no doubt that the world economy has already entered a recession phase and there is only debate about its extent and duration.
The US dollar remains the main driver of the currency market movement. Most of the last trading week, the dollar index kept the upward motion vector. Investors still consider the American currency as a protective asset, despite the alarming signals on the labor market. According to the data released on Thursday for the reporting week, the number of applications for unemployment benefits increased to a record 6.648 million. Experts expected a more modest growth of 3.5 million. After the publication of these data the head of the Dallas Federal Reserve Robert Kaplan said that at the moment the unemployment rate in the U.S. may jump to 10% and at the end of the year this figure may fall to 8%.
For G7 currencies it is quite difficult to resist the pressure of the dollar. The economic activity in these countries also continues to slow down amid increasing quarantine measures. In Europe, the problem is aggravated by the fact that the EU countries are not yet able to reach agreement on stimulus measures. The ability of the ECB to influence the situation remains limited due to the long period of implementation of soft monetary policy and negative rates.
Precious metals market
Despite growing risks and strong demand for protective assets, gold was traded in different directions during the past week. The American currency still has a very strong influence on precious metals. The growth of the dollar limits the opportunities for strengthening the yellow metal.
The oil market traded in a fairly limited range for most of the week, maintaining a predominantly lateral orientation. Market volatility rose sharply on Thursday afternoon. Not surprisingly anymore, through tweeting, Donald Trump said he talked to the leaders of Russia and Saudi Arabia and convinced them to stop the price war and start new negotiations. Oil prices soared by more than 20% in a short time and continued to rise at the trading on Friday. According to Reuters, OPEC+ may hold an extraordinary meeting already on Monday, April 6. The meeting will discuss the possibility of reducing production by 10 mn barrels per day.
The world stock indices completed the trading week multidirectionally. Investors are nervously responding to any news. As negative reports are still prevalent in the market, a bearish trend prevails in the medium term.