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December 28, 2020

OctaFX, 9 Major Economic Events that changed the Global Financial Market in 2020

Looking back the 9 major market events that changed the global economy in 2020.

9-Major-Economic-Events-that-changed-the-Global-Financial-Market-in-2020 9-Major-Economic-Events-that-changed-the-Global-Financial-Market-in-2020

Review of the 2020 events that affected the markets most

Review of the 2020 events that affected the markets most

1. January – Rising rate of coronavirus

Investors watched closely as an unknown virus overtook China and the world.

They analysed the impact of the disease on leading East Asian economies.

Later, it became clear that the virus responsible was COVID-19.

The rising tallies of those infected lead to a global pandemic, which affected currencies, stocks, and commodity markets.

2. March – Approval of a stimulus package for the U.S. economy

The stock market also went down along with oil.

Thus, the SPX500, one of the most popular stock indexes, which includes 505 selected public companies traded on American stock exchanges with the largest capitalisation, fell to 2,172 USD, which is almost 36.5%, between 20 February and 23 March.

The coronavirus has paralysed thousands of companies and businesses in the United States, resulting in the loss of millions of jobs.

This is the worst crisis in the United States since the Great Depression at the turn of the 20th century, according to leading economists of major investment banks such as Bank of America, Goldman Sachs, JP Morgan, and others.

As a result, the U.S. Senate and the White House agreed on measures to stimulate the national economy by 2 trillion USD on 24 March.

These funds were used both for direct payments and benefits to Americans, support individual businesses, and aid to states adversely affected.

3. April – OPEC / OPEC+ cutting supply agreement

One of the first assets that experienced the impact of the pandemic was oil.

On 8 January, the price of ‘black gold’ fell 9% in a single day from 70.75 USD per barrel.

However, the most significant collapse in the history of the oil market occurred between March and April.

The price plunged to 19 USD per barrel.

Countries began placing international travel bans and movement restrictions.

This act led to the airline industry, the largest consumer of petroleum, almost completely shutting down.

The glut of oil caused a storage overload, forcing producers to find any container that could store oil.

With investors expecting a reaction from the OPEC (the Organization of Petroleum Exporting Countries) and the OPEC+ group, including Russia, OPEC and its partners made an unprecedented decision at an emergency meeting in April to cut oil production by 9.7 million barrels per day, starting 1 May 2020.

This decision triggered a rally in oil prices from 19.17 in April to 49.85 USD per barrel in December.

Reaching an all-time high in gold prices

4. August – Reaching an all-time high in gold prices

The gold market was also battered at the beginning of the year, but since the second half of March, the precious metal has shown steady growth.

Gold rose from 1,450 to 2,080 USD per ounce, which is nearly a 43% improvement since the beginning of August.

The increased demand for gold is due to the global pandemic.

The first wave, second, wave, lack of vaccines, and political instability ahead of the U.S. election pushed people to safe assets.

Gold is seen as a safe-haven asset, like the U.S. dollar and Japanese yen.

The drop within the foreign exchange market can be explained by the USD’s sharp rise against all major currencies.

5. August to Present – Second coronavirus wave

The summer had seen several countries reopen their borders thanks to a drop in coronavirus cases.

By the end of August, however, headlines were cluttered with reports regarding the second wave of coronavirus.

Unlike the first wave, this wave struck all countries at the same time.

The total daily increase of those infected during September and October were 2 to 3 times more than the peak in May.

In November, many European countries, such as the U.K., France, Germany, Italy, and Greece, reintroduced regional lockdowns and established stricter sanitary measures.

In parts of the U.S. and Russia, there were also controls imposed.

All of these events significantly impacted bitcoin.

The digital currency rose from 9,700-10,500 USD to a record-setting (at the time) 19,920 USD.

Investors have begun to consider bitcoin a safe-haven asset, along with gold and the USD, as well as a currency for hedging.

6. August to November – Coronavirus vaccine discovery

August witnessed the first coronavirus vaccine, which was registered in Russia.

The positive news led to a sharp decline in gold prices, which had previously set a record at 2,080 USD.

Gold is often associated with critical global situations, large-scale war, and political instability.

It took just two days for gold to lose nearly 8.3% of its value, dropping to 1,862 USD per ounce.

Subsequently, in November, Pfizer (with BioNTech), Moderna, and AstraZeneca announced the completion of the final phases of their testing for a coronavirus vaccine.

These vaccines showed an effectiveness rate between 94% to 100%, depending on the strain’s severity.

The news made gold tumble once again, this time to 1,762 USD per ounce.

The positive information regarding vaccines renewed optimism in the market and erased investors’ concerns about the global economic recovery’s slow pace.

However, questions lingered regarding the speed of registration of the vaccines in the U.S. and Europe.

The U.K. became the first country to register the Pfizer vaccine, which began distribution on 7 December.

United States Presidential elections

7. November – United States Presidential elections

The 2020 U.S. presidential election, held on 3 November, is unofficially recognized as perhaps the most controversial in history.

President Trump, the incumbent, represented the Republicans while former Vice President and Senator Joe Biden represented the Democrats.

Following a laborious vote that went on for over a week, Joe Biden took the lead, according to state data.

However, President Trump objected to the final tallies, alleging major fraud, citing multiple rule violations.

President Trump’s team filed lawsuits in Georgia, Wisconsin, Michigan, and Pennsylvania where fraud was alleged.

As a result, most of the lawsuits were rejected, except a few minors victories, which did not significantly impact the results, thus clearing Joe Biden’s path to be named the winner.

The election caused a sharp spike in gold prices in early November, rising to 1,965 USD per ounce, due to political instability.

Following the typical procedure, on 23 December, the Electoral College votes must be submitted to the chairman of the Senate and approve by a joint session of both houses of Congress on 6 January.

The presidential inauguration will take place on 20 January.

8. November to December – The December agreement OPEC / OPEC+

The approval of the OPEC + deal’s new parameters was a significant reason for optimism in the oil market in early December.

From 1 January 2021, the cartel countries’ quota for oil production was expected to increase by almost 2 million barrels per day.

This was according to the previous agreement, which was accepted when oil was tumbling downward.

The second wave of the pandemic, which threatens to keep oil demand low, forced countries to increase their production only by 25%, or 0.5 million barrels per day, of what was initially planned.

Saudi Arabia suggested to cancel production until the middle of 2021, but the Russian oil producers refused.

The latest OPEC+ agreement and a positive outlook for coronavirus vaccines have stimulated a rise in Brent oil prices.

Since the beginning of November, the prices went from 36.30 USD to 48.80 – 49.80 USD per barrel by December.

9. December – The Brexit trade deal

The E.U.and the U.K. pledged to sign an agreement on trade and security which would be finalised 31 December 2020.

According to a study by the German economic institute IFO, the U.K. is set to suffer a series of financial losses resulting from leaving the E.U.

Currently, both sides are focused on an agreement to develop a mechanism to ensure that neither side can distort trade by undermining the European standards.

Negotiations between London and Brussels on the post-Brexit trade agreement have stalled for several months.

News about the upcoming agreement on a trade deal was the trigger for the GBPUSD pair’s growth beginning mid-September starting from 1.26700 to the levels between 1.33000-1.35000.

Invest in Forex and CFD Markets today

The year 2020 brought the world some significant challenges and opportunities.

While 2020 may always be associated with turmoil brought on by the coronavirus, traders may remember this year for the opportunities the market brought them.

During this past year, the value of nearly every Forex trading instrument has fallen significantly.

Most currency pairs and commodities have updated their historical lows while experiencing high volatility, which is often exploited to profit.

From our perspective, 2021 will be the year of recovery both economically and socially.

Like in periods of destabilisation, such as in 2020, recovery will bring bountiful chances for gains.

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