Yesterday, the Federal Bank of America made its first out-of-session emergency interest rate cut in the face of a faltering stock market and wider global trade concerns caused by the continuing Coronavirus outbreak.
Fed chair Jerome Powell announced the -0.50% cut in rates after noting the “broader spread of the virus” including two Wall St cases reported yesterday alone. Needless to say, this kind of dramatic action is usually only reserved for times of serious peril; the last was during the 2008 financial meltdown, where banks globally responded unilaterally to reduce rates, and the same looks set to happen again with Australia quickly following suit last night as they cut rates by -0.25%.
The intervention by a central bank like this signals how the experts are now viewing the likely impact Coronavirus will have on global trade. So far, in the USA, the markets have had a mixed reaction to the news, the USD took an instant hit across the board against most majors before recovering on the sentiment that it was only a matter of time before the respective currency it is against is forced to follow suit. No currency seems safe.
This news could not be more severe for currencies such as the Euro and Japanese Yen. With negative interest rates already in place to desperately attempt to stimulate demand, the ECB and BoJ are nearly out of options, with the worst seemingly yet to come. Contact us today to speak to our team of FX specialists.
Have a great day.
Author: Joshua Haden-Jones, Senior Relationship Manager
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