The Fed's surprise 50bp rate cut yesterday initially weakened the dollar
The G7 announcement yesterday confirmed central banks and some governments stand ready to support the economy in the face of coronavirus. The Fed promptly reacted by cutting rates and the Bank of Canada is expected to cut today. The dollar gave back some recent gains on the Fed cut and has since stabilized. Economic numbers out later today and this week are generally viewed as less meaningful because they do not cover the time since the coronavirus economic impact became significant.
March 4, 2020
EUR/USD 1.1107 GBP/USD 1.2813 USD/CAD 1.3346 AUD/USD 0.6618 USD/JPY 107.3900 USD/CNH 6.9263 USD/ILS 3.4544 USD/MXN 19.3414 USD/CHF 0.9572 USD/INR 73.2250
The dollar sold off yesterday after the Federal Reserve delivered an immediate 50 basis point cut to interest rates in an effort to support the economy against the impact of the coronavirus. The dollar sell-off was widespread as most currencies gained vs. the greenback.
The 10-year treasury yield fell below the 1% mark for the first time in history.
Investors seem to be reacting with relief that centrist Democrat Joe Biden staged a late resurgence in Super Tuesday elections.GBP
The pound is at the bottom of a broad trading range between 1.28 and 1.33 which began after Boris Johnston’s election last fall. Investors are wrestling with the UK’s prospects as they negotiate a new trade agreement with the EU – by far their largest trading partner. At the same time, many of the UK’s largest companies gain much of their revenue and profits from international markets that are now uncertain due to coronavirus.EUR
The euro gave back all of yesterday’s gains and then some. The carry-trade unwinds that have been supporting the euro over the past couple weeks seem to be subsiding. ECB could follow the example of the Fed and ease rates by 0.10% at next week’s policy meeting according to some analysts.CAD
The Canadian dollar is stronger in front of the Bank of Canada rate decision later this morning. The price of oil continues to increase for a third day in a row but is still down 23% from January.ASIA/PACIFIC
Asian currencies gained vs. the US dollar on a large drop in US interest rates. The exception being the Japanese yen which lost ground due to it’s safe-haven status. The Indian rupee is under pressure as the coronavirus count increases in that country.