Price of the epidemic, the Fed and BoE decisions

30 בינו׳ 2020

Yesterday, investors felt less relaxed and confident than it was on Tuesday. The VIX index stopped pouring, gold even rose by the end of the day, the Russian ruble returned to decline, as did oil. That is, everything is back.

Investors can understand: the number of deaths continues to grow rapidly, as does the number of cases. As a result, the current epidemic has already exceeded the 2003 SARS epidemic in scale. But events are still developing.

Yes, China is doing everything possible and impossible to stop the epidemic: closing transport links, prolonging holidays, isolating entire cities - all this has a well-defined economic price.

ING experts believe that this could cost China a loss of 0.3% of GDP growth in the 1st quarter of 2020.

So for now, we are only strengthening our desire to buy safe-haven assets, stock market assets and other risky assets such as the Russian ruble.

In addition to reports on the situation with coronavirus, the main event of the day yesterday was the announcement of the decision of the Federal Open Market Operations Committee. As expected, they did not change the bid. Of interesting and important. The Fed has extended repos at least until the end of April this year. That is, the markets will continue to fill in with money, which in itself is an occasion for dollar sales in the foreign exchange market.

Today, the Fed will intercept the baton of the Bank of England. Despite the fears of some investors that the Central Bank will reduce the rate at the meeting, we believe that the monetary policy parameters will remain unchanged. Given that the pound has dipped quite well recently, today we will buy it against the dollar. But with mandatory small stops because surprises, although unlikely, are possible.

In addition, the US GDP data will be published today. This is the final reading, so no surprises should be expected, but the indicator is important in itself, so you need to follow it up.