Will Europe benefit from Asian panic?

The beginning of this week is quite unusual. Today we see a strong strengthening of the dollar against virtually all currencies. The USD alone gained over 150 pips. However, the increases do not have any basis in the data. PMI readings were very mixed, therefore we can not talk about  strengthening of the dollar based on the above publication. The Wednesday's meeting will be a key event this week FOMC. His tone will probably be quite neutral.

All forces focused on Wuhan

Practically since the closure of Wuhan, it was known that the disease would soon play a significant role in the creation of the Chinese economy. When I talk about creation, I mean economic activity. It is worth adding that China has introduced very strong restrictions on many aspects of everyday life. They are inter alia related to communication between cities. Travel guidelines have inevitably affected tourism and state revenues from public transport. This is the price the Chinese are able to pay to limit the spread of the virus.

CHNComp chart, H4 interval. Source: xNUMX XTB xStation

The government already suggests extending holidays (especially in factories) to limit the risk of spreading the virus. It can be said that there has been a slight economic paralysis, which we will probably notice in future PMI publications. Only the March readings will fully show the panic caused by the disease. The most important factor that will shape the readings will be the time it takes China to stop the virus.

Europe can gain

Investors' attention is clearly focused on European industrial readings. The year 2019 left a clear dose of uncertainty about economic issues of the Eurozone. The "small recession" in the industrial sector began to generate the first signals of stabilization. Loose monetary policy as well as good and solid consumer spending shed some hope on maintaining the situation. Companies began to adapt to new conditions, getting rid of the excessive amount of inventory, the storage of which without use generated high costs. Thanks to these activities, we should look for strengthened euros in relation to local currencies in the near future. Panic in Asian markets today should rather support European economies.