How coronavirus has impacted the forex market
The full impact of the coronavirus on forex still remains to be seen. Commodity currencies like the Australian dollar, New Zealand dollar and Canadian dollar all felt the effect of early lockdowns and reduced demand for minerals, oil and other commodities upon which the strength of these currencies rely heavily.
But, certain ‘safe-haven’ currencies like CHF, EUR and the Japanese yen (JPY) have all strengthened relative to the dollar during the coronavirus, which is interesting to note.
Some put this down to the fact that the virus has had a significant impact in the US, which was leading the world in terms of confirmed cases and deaths at the time of writing (14 September 2020).
But, the fact remains that aside from USD, these currencies – CHF, EUR and JPY – are all considered safe havens in their own right. So, they might just be considered a stronger store of value during the pandemic than USD, which as the world’s unofficial reserve currency tends to be more susceptible to fluctuations. This has caused USD to weaken in these pairs.
What will be interesting going forward is the level of fiscal stimulus that central banks deem necessary to implement – especially in the face of a second wave.
Looking ahead
The outlook for forex is mixed, and the prospects for each pair will depend on how quickly life and economic activity returns to normal. Plus, the outlook for the forex market in general is hard to gauge because as one currency in a pair strengthens, the other will weaken – meaning that each pair needs to be looked at on an individual basis.
It’s worth stating that with recessions largely in effect around the world, including the US and UK, currencies could experience a decline looking ahead into the latter months of 2020 and beyond. You should keep an eye on interest rates – particularly in the US – over the coming months as central banks take steps to offset the effects of recessions.
Lower interest rates indicate that a currency might lose value, while higher interest rates indicate that it might gain in value – relative to other currencies that it’s paired with.
How can you take advantage of volatility in the forex market?
- Create or log in to your trading account
- Search for the currency pair you want to trade
- Choose your position size
- Select ‘buy’ to go long or ‘sell’ to go short
- Confirm your trade and monitor your position
You can take advantage of volatility in the forex market by trading forex pairs that stand to either gain or fall during the pandemic.
If a pair stands to gain – meaning the quote will weaken relative to the base – you’ll want to go long.
If a pair stands to fall – meaning the quote will strengthen against the base – you’ll want to go short. Financial derivatives like CFDs are useful products to use to go long or short because they let you speculate on an asset’s price movements without having to own the asset directly.
We’re the world’s No.1 CFD provider1, with educational resources like IG Academy to help you learn all about the markets. Plus, our expert support is here for you 24 hours a day, and our award-winning platform2 is available on desktop and mobile, so you can trade wherever you are, whenever you want.
Create an account to trade forex today. You’ll be able to go long or short, and trade 24 hours a day3 – with high liquidity and constant opportunities on a wide range of forex pairs.
https://www.ig.com/en-ch/news-and-trade-ideas/what-is-the-impact-of-coronavirus-on-currency-pairs--201007
2020-10-08 07:47:14Z
CBMiaWh0dHBzOi8vd3d3LmlnLmNvbS9lbi1jaC9uZXdzLWFuZC10cmFkZS1pZGVhcy93aGF0LWlzLXRoZS1pbXBhY3Qtb2YtY29yb25hdmlydXMtb24tY3VycmVuY3ktcGFpcnMtLTIwMTAwN9IBbWh0dHBzOi8vd3d3LmlnLmNvbS9lbi1jaC9uZXdzLWFuZC10cmFkZS1pZGVhcy93aGF0LWlzLXRoZS1pbXBhY3Qtb2YtY29yb25hdmlydXMtb24tY3VycmVuY3ktcGFpcnMtLTIwMTAwNy5hbXA
Bagikan Berita Ini
0 Response to "What is the impact of coronavirus on currency pairs? - IG Bank"
Post a Comment