Moody's says Fed rate cuts may fall short of stabilizing markets

Moody's says a Fed rate cut may fall short of stabilizing markets.

Key notes

• Moody's says Covid-19 poses downside risk to US economy, & though there are limits to monetary policy, the Federal Reserve may need to step in.
• Moody's says if financial market conditions continue to tighten, odds of rate cut will increase.
• 27 Moody's says previous assumption that coronavirus will be contained to china proved optimistic, and odds of a pandemic are rising.
• Moody's says previously put odds of Covid-19 pandemic at 20%, but now put them at 40%.
• Moody's says coronavirus pandemic will result in global and u.s. recessions during first half of this year.

FX implications

Such a move by the Fed would make the carry in CAD more attractive. More on that here. Meanwhile, the CME Group FedWatch shows a 72% probability of a rate cut in March.

• DXY: Markets pricing in a Fed rate cut although a EUR/USD correction is on the cards