Press Release: July 14, 2020
The second quarter of 2020 will go down in infamy as the deepest recession of our lifetimes. Even though the full picture will not be clear for a couple of months, the granular data that appeared in May and June leaves investors in no doubt that the lockdown brought economic activity almost to a stop in April, leaving no part of the world unaffected.
In June the International Monetary Fund made another downgrade to its World Economic Outlook. The IMF believes the global economy will contract by 4.9% this year before recovering by 5.4% in 2021. Those projections are 1.9% and 0.4% below the estimates three months ago. The hardest hit are expected to be to Italy and Spain, which were badly affected by the pandemic. In both cases, gross domestic product is expected to shrink by 12.8% in 2020 and to rebound by 6.3% next year.
The progress of Covid-19 played an important part in deciding currency direction, but it was by no means the only factor. Investors also paid close attention to the efforts of central banks and governments in their provision of monetary and fiscal stimulus. Even though most mainstream interest rates had fallen as far as they were going to by the end of March, there was still plenty going on in the arena of quantitative easing and government handouts.
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