The Economic Impact of Coronavirus


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EagleFX Team
EagleFX Team added a new post
last year

What is Coronavirus?

Coronavirus belongs to a family of viruses that cause sufferers illnesses which range from relatively mild ailments such as the common cold. It can, however, carry a more serious threat to humans with diseases such as MERS-CoV or Middle East Respiratory Syndrome, with 858 deaths reported since 2012.

The coronaviruses are zoonotic - this means the disease can be passed between both animals AND humans.

Identifiable features of the virus include respiratory problems, shortness of breath, fever, kidney failure and death. To prevent the risk of infection, cleanliness is encouraged. Regularly wash hands, cover nose and mouth when coughing, thoroughly cooking food - especially meat and eggs. It is advised to reduce contact with people showing symptoms.

Economic Impact

During the initial week, the economic impact was relatively limited. Asian equities were soft and commodities saw downward pressure at the end of January.

However, with the situation worsening, the economic impact could become severe.

There are fears for the Chinese economy as a result of the outbreak and the timing could be better as the Chinese and Americans have been embroiled in a trade deal for the past 2 years. Could the added pressure of the disease cripple the Chinese markets?

JPY and CHF are looking good despite the crisis. The YEN exchange rates have held onto defensive support with USD/JPY coming down from highs of 11.00 over the last 8 months. EUR/CHF is at an almost 3 year low below 1.0750. Forex investors will be interested in assets containing high liquidity during these times with a nod towards the biggest liquid asset in the world - the US Dollar.

Oil prices have also fallen amidst the outbreak. Due to travel restrictions, in particular, aviation travel, the demand has dwindled somewhat with WTI slumping to 7-week lows below $56.0 p/b.

Analysts at Westpac are leaning towards the notion that the NZD will be heavily impacted by the outbreak as the New Zealand economy is heavily reliant on China. With travel bans, flights grounded and Chinese factories not operating at full steam, there are concerns on how the slowing of distribution could affect nations in the South Pacific.

When analyzing the Forex markets, it is important to consider the trends from the 24th and 30th of January as this was an extended Chinese New Year and with those celebrations comes a sharp decline in economic activity anyway.

Coronavirus in numbers: As reported by The World Health Organisation as of 3rd February 2020

Reported cases: 24,642
Critical condition cases: 3,223 (13% of all reported cases)
Deaths: 493 (491 of which are in China, 1 in Hong Kong and 1 death in the Philippines)
Recovered from illness: 1,039
Countries with reported cases: 25

Worryingly, the virus has spread to Europe, Australia, and the Americas with 2 critical in Italy and 1 in France.

To cope with the epidemic, China built a hospital in 8 days to cope with the growing outbreak. An incredible feat that would be considered a story in itself had the buildings rapid construction not been the result of a global outbreak.

The construction of the hospital is in Wuhan, the outbreak center of the virus and home to 11 million people. The new hospital is set to contain 1,000 beds. The newly built hospital is based on a similar project in Beijing which was built to cope with the SARS outbreak in 2003.

They are pledging to build more hospitals in the coming weeks.

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  • 5
  • Comment
  • Teejy
    Teejylast year

    The more it infects the more impact it will have, they need to slow the rate of infection down or the economy could take a massive hit.

    • Johnnyboylast year

      Its slightly disconcerting about authorities reactions,. Some say they're downplaying it others say its blown out of proportion. Time will tell

      • Al Bainers
        Al Bainerslast year

        This will have big impact on the US trade deal. Put your money into Gold or Bitcoin

        • Hagler
          Haglerlast year

          I think they are underestimating it and when the truth comes out there will be a huge impact on their economy.

          • momo3HC
            momo3HClast year

            The impact is getting bigger and bigger. That’s the right time to invest into safe havens.

            • cashisking86
              cashisking86last year

              Until it is fully under control the safe havens will rule the roost along with the USD apparently, seemingly unaffected by its impact. Even Bitcoin is surging at this time which is surely linked in part to this outbreak.