Asian stock market surged! Printing money works?
The Federal Reserve (Fed) announced on Monday an “unlimited” amount of quantitative easing measures and plans to support credit markets to boost the economy, which has been severely damaged by the global pandemic. The Asia-Pacific stock market is doing well today, with the Nikkei rising by more than 1200 points and the Hong Kong HSI currently rising by nearly 1,000 points.
It is also reported that that G-20 leaders may discuss the new coronavirus epidemic through a video conference on Thursday. Investors are now looking forward to more measures implementation that may be good for the global economy recovery.
However, based on the latest information, the global pandemic is still worsening. Even if the Fed injects an unlimited amount of liquidity, quantitative easing measures can only alleviate the problem of tight liquidity, but not the virus.
ZFX analyst Jacob Leung said that if the liquidity problem continues to improve, the dollar index may fall, which may be a good signal for the financial market.
Investors are watching the U.S. stimulus plan
The dollar is dropping more on Tuesday. The dollar index now has fallen back to about 101.5 level from the high of 103 earlier. Gold price further jumped to $1590 level. Investors remained uncertain about the decision of the US Congress.
The U.S. economic stimulus plan which more than $1 trillion failed to pass in the U.S. Senate on Monday because Democrats thought certain details were unreasonable.
Many investment banks have tried to evaluate the “unlimited QE”. Besides the risk aversion, most of the reports believe that the gold market would be definitely benefited, and the gold price may be pushed up to $1700 or even higher.