News & Analysis
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The dollar weakened against most developed and emerging market economies overnight and is also lower compared to Friday’s close when measures using broad indices such as the Bloomberg dollar index after the Federal Reserve embarked on a historic expansion of its monetary accommodation.
Flash Purchasing Managers Indices for the UK and leading Eurozone economies will be released on Tuesday morning, giving markets a first look at the impact of the coronavirus outbreak on business confidence.
The combined fiscal and monetary response from the UK is both cutting edge and timely and is likely to be studied in textbooks for decades to come. As far as mitigating the economic impact of the coronavirus, it is likely to be a “best in class” solution in terms of scope and timeliness.
Fed switches to “Whatever it takes” in bid to beat yield curve and financial conditions into submission
Jerome Powell and the FOMC have finally had their “whatever it takes moment” and promised open ended asset purchases aimed at beating the US yield curve and financial conditions into submission.
Sterling is trading roughly flat against the euro this morning compared to Friday’s open, suggesting that Friday’s seismic fiscal measures from Rishi Sunak have not had a significant impact on sterling, which remains driven by global risk appetite.
All major currencies are in the green against the US dollar overnight, after the wave of risk aversion and dollar liquidity stress that drove the greenback higher has abated slightly.
Norges Bank unanimously decided to cut its benchmark policy rate by 75 bps to 0.25% this morning – a record low for Norway’s economy. The previous cut was announced just a week ago when the central bank reduced its policy rate from 1.5% to 1%.
Global currencies began to rally overnight as risk appetite improved and bond yields fell in the developed world, although some major currencies have yet to recoup their losses from yesterday.
The dollar’s rampage continues into another session today in FX markets, focusing on the G10 currencies that previously performed well amidst the market turmoil; EUR, JPY and CHF.
The Bank of England has decided to cut interest rates by 15 basis points to 0.1%, and will increase asset holdings by £200 billion following an extraordinary meeting.