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Emergency meetings of central banks are no longer surprising

16 Mar 2020 01:24 PM

Markets have recently become accustomed to sudden decisions and meetings from some central banks amid a worldwide spread of Covid-19, reminiscent us of the decisions made by banks in the wake of the 2008/09 financial crisis.

Over the weekend, the Federal Reserve surprised markets with an emergency meeting in which it cut interest rates near zero levels and the possibility of expanding its balance sheet by about $700 billion in the coming weeks, following a similar move earlier this month by cutting 50 basis points.

As the week began, the dollar index fell to its lowest level since March 20 at 97.45 and may continue to decline to target the next support level at 97.37.

The euro declined strongly during the last week nearly 400 Pips, as EURUSD reaching lowest levels at 1.1054, following the European Central Bank's expansion of its asset purchase program by about 120 billion euros until the end of 2020.

The Bank of Canada also surprised markets hours before Friday’s close by cutting interest rates by 50 basis points for the second time in nine days to try to cope with a possible recession caused by the spread of the coronavirus, this is the first cut since the financial crisis, pushing interest rates to their lowest levels since September 2017.

Canada's policymakers' concerns that the economy will be negatively affected by the spread of the virus and, on the other hand, as a result of low oil prices, Bank of Canada Governor Stephen Poloz says the bank may inject liquidity into the market, following government pledges of 10 billion Canadian dollars ($7.2 billion) in support for Canadian business.

The Canadian dollar continues to trade at a four-year low against its U.S. counterpart, as the USDCAD trading at 1.39, and we may see rising to 1.40, which could lead us to 1.43/46 levels.

The Reserve Bank of New Zealand was also surprised by a 75-basis rate cut to 0.25%, and indicated that it would remain at those levels at least for the next 12 months, as the risk of the ongoing spread of the Coronavirus increases, and the Bank believes that New Zealand goods and services are constrained by those risks.

It is likely to see more stimulus, and the Bank may offer a large-scale government bond-buying program, which the Monetary Policy Committee sees it preferred than further lowering interest rates. It should be noted that a review of monetary policy will be carried out on March 25th.

As for the New Zealand dollar, it is trading near 11-year lows against the US dollar at 0.6040, and we could see further decline and possibly targeting 0.5900 levels.

This morning, the Bank of Japan, which held an emergency meeting and expressed its intention to take additional steps in its easing policy when necessary and did not hesitate to do so, and while they kept interest rates unchanged at this meeting, they intensified its purchases of ETFs.

As the week's trading began, traders headed to buy the JPY as a safe haven amid uncertainty over the coronavirus, hitting all-day highs against the US dollar, with the USDJPY currently trading at 105.80, moving within an ascending channel, which may open the way for a further decline for the pair as the channel breaks, and prices may be visit support level at 105.18 at the channel's uptrend line.

Gold prices continued to fall at their lowest levels since the end of last year to trade at $1,510 an ounce, and with breaking these levels, we may see prices continue to fall to $1,450.

Oil continues to suffer from selling pressures, with WTI prices hitting its lowest level since March 9 at $30.10, and we may see further price falls targeting $29.60 levels, the target of a 1-hour rising wedge pattern.


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