The first trading month of the year is almost ending, and traders/investors look at the economic recovery ahead and its implications. Without exceptions, everyone expects the COVID-19 pandemic’s end this year, especially considering the vaccine rollout and the speed that vaccination took in some parts of the world.
For its part, the United States accelerated the process lately. It vaccinates about a million people a day, a rate that promises herd immunization by the end of the year. At that point, the economy should be well on the recovery track, especially considering that the U.S. economy already performs better than its peers.
All Eyes on the Oil Market
One of the markets that may offer clues about the economic recovery is the oil market. An increase in demand should push the price of oil higher, suggesting an ongoing economic recovery.
J.P. Morgan, one of the largest investment houses in the world, sees the price of Brent crude oil possibly reaching $68 in 2021, as a deficit in the supply and demand balance shows the need of an extra 1.3 million barrels per day. Should the OPEC+ not intervene to cover for the deficit, the price of oil could easily increase, especially if the economic recovery picks up.
Emerging Markets Economic Growth to Outpace Developed Economies
Emerging markets’ high yield economies are projected to recover the lost ground but not as much as North Asia economies. China, for instance, is projected to grow by 9.2% this year, well above its pre-pandemic levels. Overall, 7.3% economic growth in emerging markets on average is well above what the world expects from the developed world.
What to Expect in the Currency Market Space?
Traders must consider what happened during the pandemic before placing their bets on what currency will decline and what will rise. If economic growth reaches pre-pandemic levels, it does not mean that a currency will do the same.
The difference comes from the central banks and governments’ actions that distorted the currency market. For example, if the Euro strengthens during the pandemic, it doesn’t mean that it will weaken on the way to economic recovery. Or, if the stock market made new all-time highs during the pandemic, it does not mean that it will fall once the economic recovery is underway.