The fear of economic paralysis on COVID-19 outbreak takes control

Walid Salah Eldin

Active member
The fear of economic paralysis drove the oil prices aggressively down losing about 30% in the beginning trading hour of the week which started an hour earlier.

After OPEC + meeting failure to reach a deal to cut the output by 1.5m barrels per day more, as Alexander Valentinovich Novak Russian oil minister insisted on waiting longer to see the Corona Virus impact on the global economy!!

The failure raised the speculations on OPEC + group breaking up driving down The Giant Saudi oil company Aramco stock price below its IPO price trading near 30 RS.

Alexander Novak said Friday that "As from 1 April we are starting to work without minding the quotas or reductions which were in place earlier"

While OPEC Secretary-General Mohammad Barkindo comments showed that the OPEC members frustration because of the Russian situation which indicate Russian readiness to accept lower prices!

WTI is now fairly trading close to $33 per barrels after these events, while the markets are anxiously waiting now for upcoming trust in global economic recovery from that virus which dampened the market sentiment the risk appetite.

The returning of this trust can raise up the demand for oil

From my perspective, on these current oil prices, there could be another emergency meeting among the OPEC + members at least to extend the current 1.7m bpd output cut well beyond the beginning of next April, before expiration can lead to more disruptions.

USDCAD which has been actually boosted by BOC's decision to cut the interest rate by 0.5% to 1.25% last Wednesday rose further in the beginning of this week trading near 1.36 on the current lower oil prices which dampen the Canadian exports value.

After meeting among the G7 Fin Ministers and central bankers, The Fed previously sparked the easing waves by cutting the Fed fund rate by 0.5% sending Gold for trading currently near $1700 per ounce.

despite the continued trust in the US labor market which lowered the odds of taking further Fed's easing actions last Friday, following the release of upbeating labor report caused unique aggressive XAUUSD rate fluctuations in the recent trading hours.

So, it is expected to see more similar stimulus reactions by other major central banks to respond to that materialized corona virus outbreak.

BOE looked having tighter rooms to stimulate the economy further fearing of inflation rising at this current critical economic stance following Brexit.

From another side, The departure of the fiscally-conservative treasurer Javid is still weighing down on the odds of having more monetarily steps to boost the economy, as the new adopted reflation policies will take that role in the coming months to raise the trust in the UK economy by spending on transportation means, roads, generally on health care and particularly on COVID-19.

While it is widely expected to see action next Thursday from the ECB side, after these previous actions by other central banks paved the way to it to take further easing actions to raise up the inflation levels and support the current fragile EU economy tilting to the downside.

The ECB seems also not ready to wait longer for the EU governments to boost the economy by adopting fiscal reflation plans, After asking for these plans several times since the previous ECB president Mario Draghi leadership.

While the current EU countries fiscal stances in EU are still generally tilting to austerity because of the debt crisis in EU which caused major political changes in EU, after about a decade of adopting austerities measurements.

Kind Regards

Global Market Strategist of FX-Recommends

Walid Salah El Din
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