The U.S. dollar has pushed higher in European trade Wednesday, in a delayed reaction to chilling estimates of the Covid-19 pandemic’s impact on the world economy.
At 3:05 AM ET (0705 GMT), the U.S. Dollar Index, which tracks the greenback against a basket of six other currencies, stood at 99.093, up 0.2%, while EUR/USD fell 0.2% to 1.0960 and GBP/USD dropped 0.4% to 1.2567. USD/JPY fell 0.1% to 107.10.
In the first World Economic Outlook report since the COVID-19 coronavirus pandemic began, the International Monetary Fund estimated on Tuesday that global GDP will shrink 3% this year, the worst economic downturn since the Great Depression of the 1930s, while France predicted an 8% contraction in its GDP and the U.K. said its budget defict could blow out to over 100 billion pounds ($125 billion).
Other reports also cast doubt on the speed of any possible return to normal after the crisis ends.
The United States may need to endure the social distancing measures adopted during the coronavirus outbreak until 2022, according to researchers at the Harvard School of Public Health.
More than 2,200 people died in the U.S. from the outbreak on Tuesday, a record, even as the country debated how to reopen its economy.
While the number of confirmed cases of the Covid-19 virus continues to climb, and is rapidly approaching two million globally, the conversation has turned more towards when countries can reopen their economies.
The big question is still how to re-open economies without re-accelerating the case curve in a chaotic manner, said Nordea, in a research note.
“Over the past week authorities in e.g. Japan and Singapore have re-tightened the stance on Corona as a new case spike was seen,” said Nordea. “This is a template of what other economies could be faced with, also here in the West. Case growth may start accelerating swiftly again, if the economies are not opened very carefully.”
Elsewhere, USD/CNY climbed 0.2% to 7.0579 after China’s central bank stepped up policy support for its embattled economy, cutting the one-year medium-term lending facility rate to financial institutions to 2.95%. That’s a record low and down 20 basis points from 3.15% previously
The cut should pave the way for a similar reduction to the country’s benchmark loan prime rate, which will be announced on the 20th, to lower financing costs for companies hit by the pandemic.