The markets have enjoyed much risk-on trading, big flows out of the safe-haven assets. JPY and CHF have been hit pretty hard, as there has been some relief that action is being taken regarding the impact of Coronavirus.
There have been credible responses from monetary authorities in China and it looks like it’s soothing market fears of a more entrenched slowdown in the Chinese economy. The People’s Bank of China on Tuesday announced that it had injected 500bn renminbi ($71.5bn, £55bn) into China’s banking system to support liquidity “during the period of epidemic prevention and control.” The injection follows a $172bn stimulus package on Monday, aimed at supporting the country during the deadly coronavirus outbreak.
Elsewhere, the Chinese President Xi Jinping told Saudi Arabia’s King Salman that China has achieved “positive” results in its prevention and control efforts in fighting the new coronavirus, the country’s official Xinhua news agency reported on Thursday. That further added to the optimism.
Additionally, Chinese officials announced they will cut in half a number of new tariffs on goods imported from the U.S. It was a move in an attempt to try and settle the financial markets both in the country and globally that were initially hit hard on fears over the virus and its impact on manufacturing and other business sectors.
Despite all of this, AUD and NZD are still being hit, as they are linked to China economically. China are their biggest two-way trading partner.
Safe Havens Could Still Return
However, safe-haven flows could come back when the data for February start to be released, as this will all provide the true state of China’s economy on the back of the coronavirus.
It is also important to note that the virus is still spreading globally, which if the pace of this picks up, the market will very likely become spooked again.
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