Dollar ends mixed after another surprise rate cut from Fed

Market Review - 16/03/2020  23:38GMT  

Dollar ends mixed after another surprise rate cut from Fed

The greenback ended mixed on Monday after the U.S. Federal Reserve cut its interest rate to a target range of 0% to 0.25% and launched new quantitative easing on late Sunday to battle the negative impact of the worldwide spreading of coronavirus pandemic.   
  
Reuters reported the U.S. Federal Reserve cut interest rates for the second time in less than two weeks on Sunday in another emergency move to help shore up the U.S. economy amid the rapidly escalating global coronavirus pandemic.    In a statement, the central bank said it was cutting rates to a target range of 0% to 0.25%.   
  
Versus the Japanese yen, dollar opened lower and then dropped to 105.74 ahead of Asian open on active safe-haven jpy buying due to the Federal Reserve's surprise interest rate cut on Sunday before recovering to 107.57 in Asian morning but only to tumble to session lows at 105.15 at New York open due partly to selloff in U.S. stock futures. Later, the pair rebounded to 106.47 due to strong recovery in U.S. Treasury yields and then swung broadly sideways.  
  
Reuters reported the Bank of Japan on Monday eased monetary policy further by ramping up purchases of exchange-traded funds (ETFs) and other risky assets to combat the widening economic fallout from the coronavirus epidemic.    The BOJ left unchanged its short- and long-term interest rate targets buy a 7-2 vote.    "They will take additional monetary easing steps as needed without hesitation with a close eye on the impact from the coronavirus epidemic for the time being," it said in a statement after a hastily called emergency meeting.   
  
Although the single currency opened lower to 1.1047 in New Zealand, price quickly rallied to 1.1199 on usd's weakness before retreating to 1.1086 in Asian morning on selling in eur/jpy cross. However, the pair then found renewed buying and gained to session highs at 1.1236 in Europe but only to weaken again to to 1.1095 in New York. Price then recovered to 1.1186 near New York closing.  
  
While the British pound opened lower to a 5-month low at 1.2250 (Reuters) in New Zealand, price found renewed buying and quickly rallied to 1.2429 on usd's broad-based weakness. However, the pair then retreated to 1.2286 in Asian morning on cross-selling in sterling especially vs euro before recovering to 1.2373 in European morning but only to fall again to session lows of 1.2203 in New York afternoon before stabilising.  
  
In other news, Reuters reported new Bank of England Governor Andrew Bailey promised on Monday that more "prompt action" would be coming from the central bank when needed to help Britain's economy weather the hit from the coronavirus outbreak.   
  
In his first public appearance since succeeding Mark Carney, Bailey told BBC News that the BoE was "very keen" to ensure the damage to the economy will not permanently impair Britain's growth prospects in future.    "That's why you saw prompt action last week, that's why you will see prompt action again when we need to take it, and the public can be assured of that," he said.   
  
On the data front, Reuters reported manufacturing activity in New York State plunged in March by the most on record to its lowest level since 2009 and optimism about the future was the lowest since the financial crisis more than a decade ago, the Federal Reserve Bank of New York said on Monday in one of the first U.S. economic data sets to reflect the impact from the coronavirus outbreak.    Rhe New York Fed said its Empire State Manufacturing Index dropped last month to negative 21.5, the lowest since March 2009, from positive 12.9 in February. The 34 point drop was the largest in the survey's history dating to 2001.    Optimism about the future also fell to the lowest since 2009, it said.   
  
Data to be released on Tuesday :  
  
New Zealand Westpac consumer survey, GDT price index, Australia RBA meeting minutes, home price index, Japan industrial output, capital utilization, UK claimant count, ILO unemployment rate, employment change, average weekly earnings, Germany ZEW economic sentiment, ZEW current conditions, EU construction output, labour costs, ZEW economic sentiment, Canada manufacturing sales, and U.S. retail sales ex-autos, retail sales, redbook, industrial production, capital utilization, manufacturing output, JOLTS job openings, NAH housing market index.