Friday Trades: EUR/USD, USD/JPY, and Gold
The overall market sentiment is risk-on. The S&P 500 index (US 500) is getting close to the all-time high. Oil is recovering quickly from its recent losses.
Asian recovery from coronavirus crisis
According to the International Monetary Fund, the global economy could suffer from the coronavirus pandemic even more than from the financial crisis a decade ago.
Nowadays the coronavirus is streaming to the West, as reported by Morgan Stanley, giving Asia a priority to come out of the crisis soon. This could be a possible solution for investors looking for safe spots to park their money.
First of all, Asia is much more prepared economically to ride out the current crisis compared to the West, as it experienced similar situations in the past. For instance, the SARS epidemic in 2003, which hit mainland China, Hong Kong, and Singapore particularly hard, and plunged their respective economies into recession. That makes these countries ready for the next disasters.
Secondly, Asian companies have stronger cash positions. The firms of such countries as Taiwan, Japan, China, Hon Kong and Korea took the first places of top 100 companies in each market with net cash position.
Also The MSCI Asia Pacific Index increased 5.5%. Asian economies with closer trade and economic ties with China are expected to see faster recovery given that China's economy is starting to see signs of normalizing with a substantial decline of COVID-19 cases, said UBS Investment Bank.
Finally, Central banks in Asia have space to cut rates. Global interest rates are already low, even negative in some countries. So, central banks in Asia obviously have more ammunition to cut borrowing costs to support their economies, compared to their U.S. and European peers, analysts suggested.
What does it mean for traders?
The arguments mentioned above encourage us to have a closer look at the JPY. Traditional safe haven, it may perform well against the euro and the British pound. Of course, so far, these are only predictions and it will be necessary to monitor the economic data coming out of Japan to confirm them.
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