Coronavirus: Financial Market Impact

Senior Market Analyst, Michael Brown, discusses how it is unclear exactly how the Coronavirus epidemic will pan out, however, we can expect further volatility for sterling.

The ongoing COVID-19 epidemic continues to roil financial markets as investors closely monitor the spread of the virus across the globe, and the impact that the epidemic will have on the global economy.

While cross-border travel and trade are two areas that will be particularly badly hit by the virus, the broader economy is also likely to suffer as a result of supply chain disruptions, lower business investment, and a fall in demand due to various virus control measures and broader public fear about the virus.

However, due to the fast-moving nature of the virus, and the mounting potential for a co-ordinated global policy response to the epidemic, the precise nature of the economic outlook is clouded with uncertainties.

No matter which of the aforementioned scenarios plays out, the coronavirus is likely to be met with a co-ordinated policy response of both a monetary and fiscal nature. Due to the nature of the economic shock caused by the virus – on both the demand and supply sides – the efficacy of looser monetary policy remains questionable, especially given the significantly limited policy headroom available to G10 central banks.

As a result, the fiscal response takes on greater significance, and is more likely to effectively juice the wheels of recovery once the global economy eventually gets over the worst of the recovery. Such expansionary fiscal policies will not only take the form of increased healthcare spending, but also targeted tax breaks and credit provision to assist businesses that are struggling to cope with the virus’ fallout.

 

Let us help you take control of your International Payments

Whilst it is unclear exactly how the Coronavirus epidemic will pan out, one thing we can be certain of is the ongoing volatility it will cause in the FX markets. It is at times like these that you need to work with an expert. To help you take control of your payments, simply follow these 4 steps:

• Assess the three global economy recovery scenarios

• Understand what currencies you are exposed to

• Speak to an FX specialist

• Develop a hedging plan to protect your profits

 

At Caxton we work hard with our customers to help them take control of their international payments and manage the inherent risk of the FX markets to ensure continued profitability.