Volatile quarter comes to an end

31 March, 2020

It has been an historic and volatile trading quarter defined by the novel coronavirus outbreak, with unprecedented central bank intervention, government action, global recession fears and severely depressed oil prices among many themes.

The sentiment pendulum has swung between extremes over the past few months, placing investors on an emotional rollercoaster ride as monetary policy bazookas and handsome fiscal packages have struggled to lift global confidence.

Although Asian markets are edging higher this morning following the better-than-expected China data and overnight gains on Wall Street, caution still lingers in the air. Global stock markets are on track for their worst quarter since the global financial crisis in 2008 and could experience more pain in Q2 as economic data from across the world starts to illustrate the negative impact of the virus outbreak.

Pound weakens as UK growth flatlines in Q4

Investors who were looking for another opportunity to attack the Pound were given the thumbs up after the UK GDP second estimate revealed that the economy showed no growth during the final quarter of 2019. Economic growth printed at 0.0% QoQ, while on an annualized basis, growth expanded 1.1% in Q4 matching market expectations.

The road ahead for the Pound remains filled with obstacles and buying sentiment is likely to diminish further, especially after the latest sovereign ratings downgrade from Fitch and lingering uncertainty over Brexit haunt investor attraction towards the currency.

Focusing on the technical picture, GBPUSD is experiencing a technical rebound on the daily charts with prices trading around 1.2300 as of writing. A breakdown below the 50% Fibonacci level, could trigger a decline towards 1.2200 and 1.2050.

Dollar still wears crown

The mighty Dollar is on route to concluding the first quarter of 2020 standing tall against almost every single G10 currency, excluding the Swiss Franc and Japanese Yen.

In times of uncertainty, everyone wants a piece of the world’s most liquid currency. Appetite towards the Greenback should remain supported by the coronavirus pandemic and global recession fears. With caution still in the air, the currency may extend gains ahead of the US jobs report on Friday, which could offer fresh insight into the health of the US labour force.

Commodity spotlight – Gold

Gold is on standby after posting its best week since 2008, as investors await new economic data to access the damage caused by the novel coronavirus outbreak.

The precious metal should remain confined in a narrow $30 range until there is a fresh directional catalyst. Should the Dollar regain its footing on risk aversion and global recession fears, this may hinder Gold’s upside potential. Looking at the technical picture, prices could jump higher towards $1675 if a solid daily close above $1630 is achieved. Alternatively, sustained weakness below $1630 may open the door back towards $1600.

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