US Fed: Rate Slash Near Zero and a $700bn Liquidity Provision.

US Fed: Rate Slash Near Zero and a $700bn Liquidity Provision.

US Fed: Rate Slash Near Zero and a $700bn Liquidity Provision.
US Fed: Rate Slash Near Zero and a $700bn Liquidity Provision.


Emmanuel Macron (French President), when he announced new restrictions to the coronavirus outbreak, while President Donald Trump also warned of a recession and reacting to the current as tough and critical. He confirmed that the easing time may likely be around July. EUR/USD is holding onto its range and fundamentals seem priced in already, except for the corona updates and relief their maybe nothing interesting.

 

France planned to shut down on Tuesday, non-essential activities are being prohibited to various degrees across the old continent, with Germany closing bars, theaters, and museums, and Spain requisitioning the private health system. In Italy, the epicenter of the European outbreak continues to record hundreds of deaths daily. Several countries are also closing borders with the EU recommending restricting entries and exits from the EU. Impact on airlines asking for government help and car factories shutting down in several places.

 

European countries are moving towards injecting Liquidity into the System with France leading the way. France offered a broad €300 billion package to support businesses and announced the waiving of utility bills during the emergency period. Fxstreet reported: Governments are backed by the European Central Bank, with President Christine Lagarde vowing support. We hope to see Germany join France in Massive spending from governments, which may boost the euro economy.

 

We expect German ZEW Economic Sentiment for March may shed some light on how European businesses see the current situation. Expectations are too optimistic, lose-lose for EUR/USD

 

Trump’s tone changes in his report on the impact of coronavirus. Trump has changed his tone, affirming that the US is suffering a recession and that the global pandemic crisis may Begin to ease up in the summer. The administration recommended prohibiting gatherings and other restrictions were announced.

 

Trump’s warnings sent US stocks plunging late on Monday, with major indexes falling by double-digits – in the worst fall since 1987. The greenback gained as bond yields dropped and as financial distress sent investors fleeing to the safety of the US dollar, albeit to a lesser extent than last week.

 

The Federal Reserve went all at on Sunday to create a receptive environment for the current pressure with its rates cut to near Zero and the further announcement of $700 billion of Quantitative Easing, and dollar swaps with five central banks with 90 days maturity limit plus the initial to create a buffer for the economy. The focus shifts to the government response. Democrats have floated a stimulus package worth some $750 billion, comparable in size to the 2009 stimulus package. Deliberations continue Capitol Hill.

 

US Retail Sales figures – usually a top-tier figure – are due out later but traders may see it as “old news” as it related to February, before the outbreak intensified and has been priced into the market already. Nevertheless, it provides a look at consumers before the recent outbreak of coronavirus.

 

The effect of the virus outbreak will continue to terrify the markets.  Johns Hopkins University reported 182,000 infections have been confirmed worldwide with deaths topping 7,000. In Italy, which is under lockdown for over a week, the death toll has exceeded 2,000. In the US, less than 5,000 have been reported infected. Citizens of different countries have adopted to work from home acting as advised by the government.

 

 

-Moses Kayode.

Derivative Analyst, Eagle Global Markets.

 

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