How Will Donald Trump’s Travel Ban Affect Currency Markets?
As if currency markets weren’t under pressure already, Wednesday’s travel ban announcement from US President Donald Trump has caused further disruption to the FX market and has been met with both shock and surprise from people all across the globe. Here we examine just what Trump’s travel ban entails and what effects this will have on the future of currency markets.
What Is Trump’s Travel Ban?
On Wednesday 11th March, President Donald Trump addressed the United States with an important coronavirus related announcement. In a bid to protect the health of all Americans, he has issued a travel ban to suspend travel from the Schengen Area of Europe to the United States for a period of 30 days. Trump stated that he did not believe that Europe had done enough to protect themselves against the ‘foreign virus’ and attributed the lack of travel suspension as reasoning for the increasing number of coronavirus cases within Europe.
What Countries Will Be Affected By The Travel Ban?
President Trump’s travel ban affects 26 Schengen European countries, which excludes the UK, Ireland, Bulgaria, Croatia and Romania. The ban will be applicable to any foreign national who has visited any of the Schengen countries at any point during the 14 days before their scheduled arrival to the US. Trump clarified that the ban will not include Americans who have undergone necessary screenings. He stated in his announcement that the ban also included trade and cargo but has since retracted this statement.
When Does Trump’s Travel Ban Come Into Effect?
The travel ban will come into effect at midnight on Friday 13th March 2020 and will last for 30 days.
How Will The Travel Ban Affect Importing And Exporting?
President Trump confirmed in his address to the nation that the travel ban will affect trade and cargo but has made contrary comments on Twitter, stating that it’s important for all countries and businesses to know that trade will not be affected by the travel ban and that the restriction ‘stops people not goods’. The announcement caused panic amongst traders who feared that transatlantic commerce would suffer, further impacting the hit to the global trade from coronavirus. That being said, it is still uncertain exactly how goods carried by European ships and aircraft across the Atlantic will be dealt with once they get to the US.
Effects Travel Ban Will Have On Stocks And Currency Markets
Immediately, news of President Donald Trump’s travel ban had a significant effect on currency markets. The US dollar (USD) and Euro (EUR) have already begun showing further signs of struggle in what was already a very fragile market. Against the Japanese yen (JPY) the US dollar weakened to JPY 103.80 from JPY 104.53 on Wednesday as the euro also fell against the US dollar to EUR 1.1222 from EUR 1.1271. There is talk that President Trump could even potentially sign a disaster declaration as a way to free up money to combat the negative effects the travel ban has had on markets.
US airline stocks, already extremely hard hit by the global coronavirus pandemic, plunged even lower on news of the travel ban. The travel restrictions will reduce the aviation industry’s demand for jet fuel, placing further downward pressure on oil prices already weakened following the Saudi Arabia, Russian price war.
European markets were on their way for their worst one-day drop in history, trading at their lowest levels since 2016 after news of President Donald Trump’s travel ban broke on Thursday. The European Central Bank (ECB) refused to cut Eurozone interest rates which could continue to negatively impact currency markets.
European airlines are equally struggling as shares in airlines such as Air France and Lufthansa are down by about 10%.
However, safe-haven currencies continue to thrive after the travel ban news with the Japanese yen (JPY) and the Swiss franc (CHF) leading the gains.
What Will Travel Ban Mean For The Future Of Currency Markets?
President Trump’s travel ban could potentially complicate international trade negotiations, contributing to further economic turmoil. The news could cause strained international relations, creating negative financial implications between the US, Europe and Asia.
The news has already angered European officials by the way President Trump appeared to be critical of Europe for not taking enough action and insinuating that coronavirus is a Chinese problem. Economists have highlighted that the coronavirus is a global issue and not something which should be attributed to one particular country.
Although news of the travel ban has immediately caused market disruption, in the long-term, analysts are predicting that currency markets will continue to remain volatile until news of the number of coronavirus cases begin to decrease.
In the midst of such an uneasy and unstable climate both socially and financially, such a hard-line restriction was always going to be met with scorn economically.