Forex news for New York trade on March 23, 2020:
- Fed establishes TALF, to do open-ended Treasuries and MBS purchases in the amounts needed
- Full text: Federal Reserve announces extensive new measures to support the economy
- Senate lacks votes to advance stimulus
- Milan region health chief says first positive signs in virus fight
- New York State sees 5707 new cases and total of 20,875
- Eurozone March advance consumer confidence -11.6 vs -13.0 expected
- Israel launches quantitative easing program
- Key line from Mnuchin: The bailout for airlines will be on market terms
- Canada Jan wholesale trade sales +1.8% vs +0.9% prior
- RBNZ Orr: Aim of our QE program is to keep the rates very low
- France COVID-19 death toll rises to 860 from 674 yesterday
Markets:
- Gold up $55 to $1554
- WTI crude oil up $1.27 to $23.90
- US 10-year yields down 8 bps to 0.76%
- S&P 500 down 67 points to 2337
- EUR leads, CAD lags
There is a war between headlines from the virus and governments/central banks on the other side. The Fed went way beyond anything in history today with a plan to buy unlimited amounts of government-backed bonds and other plans to buy things like investment grade corporate bonds and credit card debt. It was enough to pull equity futures from near limit-down into solidly positive territory. But it didn't last as the Senate fumbled the stimulus bill and waves of headlines about the virus slowly reversed optimism.
The Fed did help to stabilize the bond market with yields finishing the day 1-7 bps lower across the curve. That was well-above the low yields of the day but in a solid spot.
In FX, the dollar fell on the Fed headlines but the market slowly had a re-think. The central bank basically took risk out of high-quality US credit. That's a greenlight for foreigners to buy and meant that a 130 pip rally in GBP on the headlines to 1.1650 slowly faded back to 1.1510 and then continued lower to 1.1450.
The USD/JPY hiccup was even shorter-lived as it fell 100 pips to 109.80 the recovered in about 90 minutes before a fresh push higher. A pair of rallies above the recent highs of 111.50 couldn't generate any momentum and we have fallen back to 111.27. The Fed highs continue to loom.
USD/CAD was a winner today even as oil prices rose $1. The ominous sign is in RBOB gasoline, which fell to a long-term low of 50-cents. That's not much of an incentive for refiners to buy and a sign that gas stations are very quiet. The pair rose as high as 1.4559 to erase Friday's decline but still has some space ahead of Thursday's four-year high of 1.4668.
The euro is one currency that managed to hang onto some of its post-Fed gains. It rose to 1.8000 from 1.0670 on the Fed headlines and later hit 1.0828 but is finishing at a post-Fed low of 1.0725 in an ominous sign.
AUD/USD and NZD/USD are both hanging onto 15-pip gains on the day. They nearly erased the Fed moves at one point but climbed after Europe went home. These two are so beaten down but that's three flatish days in a row, which is either a consolidation before a new leg down or a sign of selling exhaustion.
