Author Steven Oram
Panic has its grip firmly on markets, with the Australian dollar in near free-fall in reaction to the COVID-19 coronavirus. Commodity based currencies like the Aussie, Kiwi, & Canadian dollars are all bearing the brunt of the damage. The ‘flight to safety’ is very active in markets, with the Japanese Yen being the largest benefactor.
Adding Perspective – It is important to prepare for the worst in these volatile times – but it is equally important to try and maintain some perspective – a market snapback is not only a genuine possibility; it is a likelihood. Globally, the number of confirmed cases has hit 85,403. However, 39,002 people have been confirmed as fully recovered, whilst 2,835 people have died. Currently – more people die of the influenza every two days than die of coronavirus.
With China recording their worst ever manufacturing data on Saturday – 35.7 for February; and non-manufacturing falling even further to 29.6; Markets are now pricing in aggressive rate cuts by Central Banks:
In fact, US Fed Chairman Jerome Powell issued a public statement over the weekend stating that “.. the coronavirus poses evolving risks to economic activity” and that “The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy”. The expectation now is that the Fed will cut rates by 50 basis points at its March 17-18 meeting.
So to the question as to whether our own RBA will cut rates on Tuesday. At the beginning of last week Markets had only a 10% chance of a March rate cut priced in. What a difference a week makes, but it is likely the RBA will provide their own insights into how they will react to the ongoing damage caused by the coronavirus.
The week is rounded out with U.S. Non-farm Payrolls numbers. Markets are expecting 175k new jobs to be added for February – which will be an indication that at least one major developed economy is getting on with business amidst the turmoil.
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