Forex news for Asia trading Monday 16 March 2020

Powell Press conference (via phone link up)

FOMC emergency rate cut

Weekend

The news over the weekend was of a continuing acceleration of the economic impact of the coronavirus outbreak with Apple shutting down all stores globally ex. China, and countries including France and Spain going into various states of lock down.

The Reserve Bank of New Zealand opened the new trading week with an announcement of an emergency 75bp cash rate cut, which slashed more than 2% from the NZD in very early trade, AUD down around 1% alongside. But, the bigger news was to follow, with an announcement from a weekend FOMC meeting of the Fed cutting to zero and adding in 700bn of QE, and with coordinated moves alongside from the ECB, BoE, BOJ and others.

In brief the Fed move:

  • cut policy rates to 0%-0.25%
  • commitment to holding rates close to zero "until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals."
  • Quantitative easing - Fed buying 500bn Treasuries & 200bn MBS
  • banks can borrow from the window for up to 90 days
  • signalled to banks they should use their liquidity and capital buffers to lend to household and firms
  • eliminated reserve requirements

For equities, trade in ES dropped to its limit low (if you need an explanation on what this means, check out the post on the limit down move bolded above).

Regional equities as I post

  • Nikkei: +0.11%
  • Hang Seng: -1.97%
  • Shanghai: -0.36%
  • ASX: -6.69%

Currencies swung about in good sized ranges for the session - a great day for the day traders in Asia with multiple plays:

  • EUR/USD initially moved higher on the session to tickle 1.12 but since dropped under 1.11 (above there now)
  • USD/JPY dropped as low as circa 105.75 before staging a 150+ point up-move to highs circa 107.55. USD/CHF followed a similar pattern, lows around 0.9445 and highs above 0.9550.
  • Cable lows early around 1.2250 to highs circa 1.2425 before (nearly) all the way back down again.
  • USD/CAD had early lows under 1.3735 before rebounding to highs just shy of 1.3900. Oil lost ground but is off the session lows.
  • Both the AUD/USD and NZD/USD were sold heavily in the session but have bounced from their lows. The RBA is preparing a policy announcement from Thursday but in a statement today said they are prepared to buy Australian government bonds. QE.

Coming up is an announcement from the Bank of Japan, the Bank has moved its scheduled meeting from later this week to today (the meeting began at 0300GMT). The last time the BOJ haled an emergency meeting was in response to the 2011 earthquake disaster.

Forex news for Asia trading Monday 16 March 2020e