Daily Currency Update

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The U.S. dollar continues to free fall following a dovish Fed and Powell urging fiscal action.

USD - United States Dollar

Fed Chairman Jerome Powell urged American congress to deliver more fiscal stimulus to safeguard the U.S. economy as he warned of a weak recovery due to severe economic effects from the virus. The economy shrank an annualized 4.8 percent, the most since 2008.

At the same time and as expected, the Fed left rates unchanged, near zero; initially the U.S. dollar was bouncing, but then it continued its downtrend. Market participants find it unlikely that the Fed will increase rates within the next three years, which is very negative for the U.S. dollar. Fed Chairman Jerome Powell said policy makers are not, “...in any hurry to move rates up,” in the next year or so.

Key Movers

The ECB kept its main interest rates unchanged at -0.0 percent as widely expected, but, as a slight surprise, declined to increase its bond buying program and put the decision off until at least the June 4th meeting. President Christine Lagarde reiterated that the Governing Council is ready to flex its emergency asset purchase program to control the turbulence in European capital markets. The ECB now expects the Euro area economy to contract by 5-12 percent in 2020. An ECB statement stated that the council is, “...fully prepared to increase the size of the pandemic emergency purchase program and adjust its composition, by as much as necessary and for as long as needed.”

China hands out one million consumption-voucher packages through local governments to get people shopping again. More than 6 billion yuan ($848 million) was distributed across at least 50 cities.

The USD/CAD fell a bit over 1 percent (strong Loonie), touching an intraday low of 1.3849. However, given that the North American equity market is falling today, the risk off mode is back in the market, making the USD/CAD pair bounce towards the 1.3900 handle.

Expected Ranges

USD/CAD: 1.3900 - 1.4009 ▲

EUR/USD: 1.0850 - 1.1000 ▼

GBP/USD: 1.2399 - 1.2600 ▼

AUD/USD: 0.6463 - 0.6550 ▼

NZD/USD: 0.6075 - 0.6169 ▼