Sentiment in global markets seems to be improving with the reporting of fewer and fewer new Covid-19 cases in China, as well as reduced fears of an increase in the epidemic in the U.S., which could have impacted the US stock market index futures early this week.
The main Wall Street indices seemed to increase losses on Monday, as fears of the epidemic spreading again quickly in the United States persisted. States such as Nevada, Florida, California and Arizona reported a record number of infections in one day. These concerns outweighed the expected stimulus and a more sustained economic recovery once restrictions were lifted. Last week, all three major stock exchange indices recorded a fourth week's increase from the last five weeks. Dow Jones grew 1%, S&P 500 climbed 1.9% and Nasdaq 3.7%. However, despite a temporary increase in pessimism, US futures seem to be above the last close price in the morning, making up for losses.
According to Bloomberg agency, Beijing has announced only nine new cases of infection, which indicates that the recently resumed epidemic in the city is under control. From an forex market point of view, the Australian and New Zealand dollars exchange rates have increased, as funds seem to cover short positions. The comments of the RBA governor, who stated that the Australian dollar does not seem to be overvalued at current levels, may also help.
According to Morgan Stanley, the Australian dollar should be popular among investors because the South Pacific country seems to be ahead of developed markets in terms of growth. Australia could very quickly recover from the coronavirus crisis. Australians may also benefit from an expansive fiscal policy, with a relatively less dovish central bank. Australia's situation should also make it an attractive place for investors looking for profits – believes MS. The bank added that the AUD/USD exchange rate could rise to 0.74.
In forecasts, Morgan Stanley expects the US dollar to weaken with the recovery of global economies and a stronger euro. The Bank expects the euro to grow in stages to 1.16 by the end of 2020.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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