World indices continue to fall
Global economic recession
Oil price collapse
Abnormal volatility of the currency market
Last week the financial markets continued to move down. Many indices finished trading with a double-digit decline. In panic, investors even sold traditional protective assets. The actions of the central banks around the world maintained a high level of volatility, which continued to reduce interest rates and increase the volume of asset purchases. Injections of liquidity of the Central Bank managed to stabilize the situation only by the end of the trading week. But many experts note that this stabilization can be a temporary respite before the next wave of sales. On Wednesday, Morgan Stanley and Goldman Sachs announced the beginning of global recession. Only its scale and duration are debatable.
The foreign exchange market continues to show abnormal volatility. Investors react quite strongly to the Central Bank to reducing interest rates and increasing the volume of QE programs.
The main beneficiary of the general panic is the American dollar. On Thursday, the dollar index rose to its highest level since December 2002. Investors were buying the dollar to compensate for losses in other markets. As a result, EUR/USD closed the trading week with a decline of more than 2.6%, the British pound fell by more than 3.2% against the dollar, while the Australian dollar fell by more than 4%.
Among the major currencies, the British pound showed the greatest volatility. In the middle of the week, the GBP/USD currency pair fell below 1.14 for the first time since October 2016, but quickly managed to recover some of the lost positions on Thursday and Friday. The growth driver was the decision of the Bank of England to reduce the interest rate from 0.25% to 0.1% and increase the QE program. Let;s remember that a week earlier the regulator had already reduced the interest rate from 0.75% to 0.25%.
Precious metals market
Despite the general panic and falling stock indices, gold was traded in the red zone almost the whole week. The status of the main protective asset was seriously shaken. Investors gave preference to the dollar. The precious metal managed to partially restore its positions only on Friday, amid the decline of the dollar. As a result, the trading week was closed with a minus.
For the oil market, the trading week will be remembered for updating the 17-year low. The price war between Saudi Arabia and Russia on the background of an active decline in demand for energy contributed to the build-up of short positions in oil. The market was able to win back some of the lost positions in the second half of the week. Quotations were supported by the situation on stock exchanges and the mass media information that the White House wants to intervene in trade disputes between Saudi Arabia to stabilize the situation on the market in order to protect national oil companies.
Despite the quotes recovery on Friday, the key world indices completed trading in the red zone. Many indices showed a double-digit fall. Against the background of growing concerns about the prospects of the global economy and the spread of the coronavirus pandemic in Europe and the United States, investors are selling off all risk assets.