Traditionally April is one of the busiest times of the year. This month acts as the passage from winter into spring, however many hope this April acts as a month of passage from the current COVID-19 crisis. Markets in March experienced record levels of volatility as the Coronavirus became a global pandemic. Markets which initially believed this was a Chinese issue, quickly realised that this transcended far beyond the Far East. This realisation left markets to trade sporadically, as we saw several record moves take place.
Gold was one of the most impacted financial instruments, trading up as much as $150, to be valued at $1705 before shortly falling to as low as $1440 a few days later. These huge swings have been a normal occurrence in March, however will this continue into April? Or will the safe passage outside of this historic crisis finally start to show itself.
How Will Markets Look in April?
There is no short answer to this question as there are several factors still to be determined. The main however, is how will nations around the globe continue to deal with this growing crisis?
In March we saw the spread of the virus reach Europe, with Italy being one of the more affected nations, even surpassing China as the country with the most cases of reported infections, reaching as high as 101,000 infections. As a result, and as other neighbouring countries suffered, most countries in the continent decided to impose lockdowns of both domestic and foreign travel. Most going as far as employing a strict “stay at home” policy, in some countries with enforcement from armed forces.
As a result we saw the EURUSD rate reach its weakest in 4 years. With the EURO being at its weakest since Brexit was announced, many European Indices experienced huge sell offs.
- DAX – Germany – fell from 13882 – 7969
- CAC – France – fell from 6104 – 3630
Now as we head into April, with those falls mainly driven by the unknown, and speculation of how much the pandemic will impact these respective European economies, April will see data released highlighting the actual impact thus far. If it is worse than the initial assumptions, then we may see further sell offs take place.
The beginning to middle of March saw Europe as the epicenter of the spread, however the latter part of the month saw this unwanted baton passed across the Atlantic into the US. American now have close to as many cases as Italy and China combined with over 170,000 reported cases in the world’s largest economy. As a result we saw the passing of a $2 trillion stimulus bill to help in the fight against the pandemic. With the Federal Reserve also moving fast to cut rates to ZERO, by having 2 rate cuts within the space of 2 weeks.
This Fiscal and Monetary action has played its part in helping ground markets, however the data coming from the US has already shown the magnitude of the situation. A record 3.3 million people have already claimed to be unemployed due to COVID-19, now markets await further news, such as Consumer Confidence which comes out later today and the Unemployment Rate on Friday to see the true toil this has taken on the economy.