Market sentiment was already viewed as a sinking ship and the Oil price crash has ensured that it has dropped even further into deep water. World stock markets have fallen at a sharp rate, with the Dow Jones Industrial Average expected to decline as much as 7% when the U.S trading session commences just minutes from now. This follows declines of 8% in the UK FTSE 100 and 5% in Japan’s Nikkei 225.
With an all-out price war in Oil between Saudi Arabia and Russia suggesting that coronavirus risks on the global economy are going to be magnified by an astonishing drop in Oil price, investors feel safer in this environment to stay away from riskier assets and turn towards safe-haven investments instead.
Gold is once again acting as the shining light and savior of investors with prices breaking above $1700 for the first time since December 2012. Where the opportunities still can be found is across Yen pairs, with the USDJPY plunging all the way to 101 from 104 so far today. The USDJPY in this environment can drop towards 100, and even 98 should the selling in world stock markets continue at the same type of pace to what has been experienced across the past few days.
Where this leaves the Federal Reserve is the major question on the minds of investors. Expectations are on the rise once again that the Fed will need to cut US interest rates as low as 0% within months, while announcing another round of Quantitative Easing is also appearing on the radars of possibility. Should this occur, the slump in the USD should pave the way for an even stronger EURUSD and GBPUSD.
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