On Friday, 31th January, Europe's financial markets went down fearing the consequences about the coronavirus. This was partly driven by a communication of the World Health Organization (WHO), in which declared an international public health emergency following the proliferation of the coronavirus.
The stock market ended the day in a fall, dragged by the virus that originated in China, which kept investors away from risk. As a consequence, assets of greater refuge were sought and the yields of the main European countries ended up decreasing. This led to an increase in the value of the Euro against the US Dollar.
Yesterday, 3rd of January, the opposite has happened. With the good news coming from China that revealed that the Chinese central bank decided to lower its main interest rate, the European stock market appreciated while in debt market yields increased with less demand. The EUR/USD pair depreciated as a result of these events.
Regarding the EUR/GBP, on 30th January, it was possible to observe a strong appreciation of the pound consequent of the interest rate maintenance from the Bank of England. There were talks of a possible decline in the interest rate, therefore this decision of keeping the rate unchanged ended up being well received by the markets. The next day was marked by Brexit and by some volatility associated with it. Yesterday, however, after a speech by Boris Johnson in which he rejects a close relationship with the European Union, the pound suffered a strong devaluation.
At dawn today, we had the cash rate (or key interest rate) coming out to the Australian economy. In a similar situation to that of the United Kingdom, it was possible to observe an appreciation of the Australian dollar when compared to the US dollar. The news was welcomed, since there was also talk of a possible reduction in the interest rate.
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