Fed Cuts Rate to 0.25% to Face National Emergency

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Fed Cuts Rate to 0.25% to Face National Emergency

MARCH 16, 2020

The U.S. Dollar is weaker this morning against Euro, Yen and other major counterparts, while stronger against Pound and most other commodity-based currencies following a tumultuous overnight trading session following the Fed’s surprise cut to interest rates and re-birth of quantitative easing on Sunday.

Overview

The weekend could not be a quiet one following the chaos witnessed Friday as consumers panic-shopped in the midst of uncertainty and shock over the potential recessionary pressures the coronavirus threat that could even mean indefinite layoffs. Currencies are all over the place with Mexican Peso at a fresh all-time low while Australian Dollar is at its weakest point since 2003.

The Fed predicting a needed period of inactivity across industries defended the move as a way to ease tension across financial markets and help prevent a credit crunch. Fed Chairman Jerome Powell was clear this must be followed with a fiscal stimulus to prevent major disruption to the economy.  The buck naturally dipped after the announcement, but it did not translate into gains in equity markets as Asian and European stocks reveal major losses with Euro Stoxx 50 dipping as much as 10.0%. It is hard to gauge any direction as other regions and central banks accommodate and try launching measures of their own. It is clear that the damage of the virus cannot be predicted, and turbulent times are forecast ahead.

What to Watch Today…

  • No major events scheduled for today.

Complete Economic Calendar can be found here.

EUR

The Euro climbed a bit along with other European currencies following the announcement by the Fed to reduce interest rates by 1.0%. The world is trying to physically prevent the disease from affecting more people with Italy being the front of how damaging the condition can be with the death toll now over 1800. Inactivity is threatening to delay and cancel further business thus why central banks are wondering how to provide monetary cushion. We shall see if any headlines point at any spending that could move the needle even more. Spain officially went on lock-down mode.

GBP

The Pound is at its weakest point since October as countries figure a way to aid the global economy as the virus forces people away from work and spending. While countries in Europe are shutting down, the U.K.’s response has been milder in hopes that a solution makes the impact far less negative than many believe. With most travel already affected; it is likely the Pound will take a hit as they also implement their easing tools.

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