So, the Fed is playing ahead again: without waiting for the March meeting, the US regulator again unscheduled lowering the rate, this time to almost zero. Fed members finally "heard" US President Donald Trump and cut the rate immediately by 100 points, that is, to 0.25%. Along with the rate cut, a quantitative easing program of $ 700 billion was announced, under which the Fed will purchase corporate bonds, injecting additional cash into the economy. The Federal Reserve noted that, due to the emergency meeting on Sunday, the planned meeting (which was to be held March 17-18) will not take place.
By the way, the Reserve Bank of New Zealand made a similar decision, lowering the interest rate to 0.25%. The Bank of Canada took a less radical step, unplannedly lowering its level from 1.25% to 0.75%. However, the Bank of Japan left the rate at the current level. But at the same time, the country's Central Bank decided to increase the repurchase of securities of exchange-traded investment funds to 12 trillion yen and assets of real estate investment trusts to 180 billion yen. In addition, the Japanese regulator has launched a cheaper lending program for those companies that have suffered from coronavirus.
The reaction of the market to recent events was controversial. The euro/dollar pair initially dropped to the middle of the 10th figure, but the bears still could not develop the downward movement. The buyers took advantage of the situation of the EUR/USD, organizing a price correction of almost 100 points.
On the other hand, the Canadian dollar rose in price on Friday and at the beginning of the Asian session, having won over 200 points against the American currency. But then the "loonie" yielded to the general mood again. As a result, the pair turned upwards again and now trading at the borders of the 39th figure.
In turn, the New Zealand dollar became the most affected instrument of the "major group". Paired with the US currency, the Kiwi broke historical records again, collapsing to the level of 0.5990. And by the end of the Asian session, the New Zealand dollar was able to partially regain his position. It received some support from the head of the Central Bank, Adrian Orr, who assured the market that he was not considering the option of negative rates. According to him, instead of this step, monetary and fiscal policies (low but not negative rates + expansion of the government bond purchase program) will be involved.
Meanwhile, the Japanese currency has risen in price against the background of "half measures" undertaken by the Bank of Japan. Obviously, the regulator is constrained in its maneuvers, so today, it has only increased the volume of securities repurchase. This fact helped the bears of the USD/JPY pair to decline from the 107th to the 105th figure. But do not rush to open short positions - sellers have already lost their grip, stopping at around 105.74. At the moment, the American currency is trying to show character again, so it is still risky to go into purchases.
In general, the dollar index shows a downward trend, but the decline is not impulsive. Today's comments by Fed Chairman Jerome Powell have suspended the rally of the American currency. He noted that the pandemic has a serious impact on both America and the rest of the world. According to him, the COVID-19 epidemic will have a strong and negative impact on the national economy. First of all, US exports will suffer due to the weakening foreign economy. At the same time, Powell also tried to sugarcoat the situation, noting that the US banking sector remains strong, with large capital and liquidity. But still, the general tone of his rhetoric was negative.
Speaking directly about the euro-dollar pair, the buyers have got a chance for temporary corrective growth. Nevertheless, the decision of the Federal Reserve is extraordinary - the downward trend of the dollar index suggests that such a scenario was not taken into account in prices. However, if the US currency will continue to be used as a protective asset, the EUR/USD correction will be short-term.
To date, more than 162 thousand cases of coronavirus infection have been registered in the world, majority in China and Italy. Iran is in third place, South Korea is fourth, and Spain is fifth. The top ten countries with the most infections are Germany, France, the USA, Switzerland and Norway. In Spain, the government introduced a two-week state of emergency, restricting the movement of people, as well as closing restaurants and other establishments. Similar measures have been taken in Italy. Previously, the state of emergency was introduced by Slovakia, the Czech Republic, Hungary, Bulgaria and Estonia. The remaining EU countries have introduced severe restrictive measures.
In other words, panic will continue to dominate the currency market. Another question is who will be the "beneficiary" of this situation? This will become clear already at the end of today's trading day. If the dollar turns out to be the most attractive "security island" again, the ultra-soft monetary policy of the Fed will not prevent the EUR/USD bears from testing the middle of the 10th figure again, with a further goal at 1.0990 (the lower border of the Kumo cloud on the daily chart).
