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Forex News

Coronavirus contagion constitute additional downside risks to near-term projections

The European Central Bank’s chief economist, Philip Lane, said on Thursday that “the coronavirus epidemic poses a bigger a risk to the economy the longer it is allowed to last.”

“More widespread contagion and a longer interruption in normal economic activity constitute additional downside risks to near-term projections,” Lane told an audience in London.

Key notes

  • Says the more quickly is the virus contained, the smaller will be the impact on the world economy and the faster will be the recovery.
  • Says more widespread contagion and a longer interruption in normal economic activity constitute additional downside risks to near-term projections.

FX implications

As per article, French President Macron: Coronavirus outbreak a “crisis, an epidemic that is on the way”, the European Central Bank is expected to be on standby to act, as are all central banks. Although, due to how close the ECB is to zero rates, the central will concur with Macron’s comment about fiscal stimulus required of individual nations. Expect dovish language from the ECB for the near term at least. EUR, however, is the strongest currency today although technically, EUR/USD looks ripe for a downside correction, more on that here: DXY: Markets pricing in a Fed rate cut although a EUR/USD correction is on the cards

EUR/USD daily chart

 

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