The financial markets have been quite volatile for the past one week or so, and it affected the U.S dollar’s performance, especially against riskier currencies due to concerns over the coronavirus.
The forex markets remained on the edge, especially due to tight dollar funding. The markets also started consolidating over the expectations that the U.S would roll out a stimulus package. Consequently, the Asian stock markets turned bullish, and there was significant movement from riskier assets. The Greenback started to demonstrate stability thanks to the Federal Reserve’s decision to pave the way for central banks around the world to access discounted dollar funding. It also made unlimited bonds accessible, and these measures improved risk sentiments.
A short-lived stabilization
Although the dollar seems to have been headed for stabilization, Wednesday’s performance may indicate that the price stabilization might not last long. The EUR/USD currency pair has been on a bullish momentum for the better part of the trading session on Wednesday morning. However, the week is still not over and thus the need to continue watching the markets to see how things will turn out. The price of the EUR/USD pair was at 1.0891 at the time of this press.
Will we see more volatility in the next few weeks?
Right now, it is difficult for the Federal Reserve to control the economy due to the COVID-19 pandemic, which has affected major industries and therefore disrupted global trade. The rising number of new coronavirus cases as well as deaths related to the conditions have exasperated the markets faster. Widespread fear over the entire situation is forcing investors to take extra precautions.
It is currently not clear how much the viral threat will continue to affect the markets, and there is a likelihood that things will continue to worsen if the coronavirus continues to spread. Such a situation may undo the recent gains seen in the market, but if the situation gets better, then the markets might get back on the path to recovery.