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Federal Reserve Employs Unprecedented Measures

Daily Currency Update

USD - United States DollarThe US dollar fell through trade on Monday after the Fed announced unprecedented monetary policy stimulus measures designed to sure up the domestic economy and cushion the impact of the looming recession. The Federal Reserve announced new programs wherein it will lend against student loans, credit cards and small businesses while supporting larger employers in maintaining as much of the domestic workforce as possible. The Fed will also expand its purchase of mortgage-backed securities to help normalize market function, doing everything it can to help guide the economy through this unmatched period of uncertainty.While broader markets remain reluctant to buy back into risk assets, we expect haven plays will remain popular through the short and medium-term. That said, we would expect the record levels of the central bank and government stimulus to bite at some point. As Congress tries to pass a 2 trillion dollar stimulus package, we anticipate confidence among investors will improve, perhaps weighing on the USD and fostering a correction of the recent overshoot.

Key Movers

urope continues to be the focal point of the Coronavirus outbreak, with Italy having recorded 6077 deaths from Covid-19 with cases predominantly located in the northern province of Lombardy. Some solace can be taken that the rate of fatalities has fallen for two straight days with Monday's figure reported the number of 602 down from Saturdays 793. The latest update today will be closely followed, and hopefully, we will see a further decline.Spain continues to suffer, in particular, Madrid, with 462 deaths reported across the country yesterday, taking the total to 2182. There are now around 380k cases confirmed globally, with nearly 17k deaths as a result of the outbreak.America has seen cases soar over the past few days, with many states now in lockdown as the virus spreads across the country. New York State is severely affected, with around half of the countries 31k cases centred there. Despite the Senate being unable to agree on a government rescue package for the nation, the US Federal Reserve has intervened, offering unlimited funds as a backstop to the economy as well as starting an unlimited QE programme. The European Central Bank is set to unveil further assistance this week to limit what is likely to be a short but profound recession, potentially dwarfing that seen in 2008.Markets seem to be in the (relatively) upbeat mood this morning however, as all major stock markets post significant gains and riskier currencies surge with both the Aussie and Kiwi posting >2% rise against USD.EUR/USD trades at 1.0860 with USD/JPY at 110.30

Expected Ranges

  • EUR/USD: 1.0752 - 1.0888 ▲
  • GBP/USD: 1.1578 - 1.1799 ▲
  • USD/CAD: 1.4375 - 1.4532 ▲
  • AUD/USD: 0.5864 - 0.5975 ▲
  • NZD/USD: 0.5734 - 0.5839 ▲