Dollar reigns supreme amid global economic uncertainty over coronavirus

By admin
3 Min Read

The world economy is suffering. The tourism industry, which has come to standstill, serves as a major example, and has left the world’s largest airplane manufacturer, Airbus, losing half its value since mid-February.

As stocks sink and investors fret about the future of the world economy, most other investment vehicles and national currencies are suffering as well, except for the U.S. dollar which has reclaimed the “King Dollar” throne.

Even as hopes of a swift end to the American economic shutdown, which has paralyzed the U.S. economy, were dashed after President Donald Trump extended the country’s restrictive social distancing guidelines until the end of April, the dollar still held fast at 0.909 against the euro.

The optimism was spurred on the one hand by the U.S.’s $2 trillion stimulus and global relief measures deployed to fight the coronavirus pandemic, as well as investors continuing worries about the intensifying virus spread and mounting global recession.

The pandemic has paralyzed businesses worldwide and driven the global economy into recession, forcing countries to respond with “very massive” spending to avoid a cascade of bankruptcies and emerging market debt defaults, Kristalina Georgieva, the president the International Monetary Fund, said on Friday.

Meanwhile, hit by an increasing loss of confidence in the European Union’s ability to handle the economic consequences of the pandemic, the euro  currency remained weak.

On Friday, EU leaders failed to agree on a common coronavirus response and member states kept arguing over the extent to which they should pool their resources to fight the economic fallout.

Germany and northern European states have steadfastly refused the introduction of coronavirus bonds. For now, it is an idea for a bond that remains simply an idea, with no firm plan behind it.

On top of the failure to agree on how to move forward, the eurozone is increasingly likely to slope towards recession. Data from Germany on Thursday showed that consumer confidence plunged and the same happened in both France and Italy.

The indicator is showing industry confidence (the so-called Purchasing Manager Index) of the eurozone hit a 22-year low this month, with a value of 28.4. This is a synthetic indicator on a scale of 0 to 100, where any value under 50 indicates industry pessimism and optimism over 50.

But optimism appears to be in incredibly short supply these days. 

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