DXY was smashed last night as the Fed cut 50bps out of cycle. EUR is on fire:
The Australian dollar launched:
Gold too:
Oil rolled:
And metals:
Miners fell:
EM stocks tried and failed:
Junk firmed but is surely going to break soon:
Bonds blasted higher:
Stocks were hammered:
Westpac has the data outlook:
Westpac expects Australian Q4 GDP to rise by a modest 0.3% in Q4 (1.9%yr). Key dynamics keeping growth below trend include headwinds around wages and productivity, a cyclical downturn in construction, and a subdued global economy.
In New Zealand, January building consents are expected to continue the flat trend of 2019, pulling back by 3.0%.
China’s February Caixin Services PMI is expected to fall by 3.8pts as the services sector absorbs the shock from COVID-19.
Turning to the US, February ADP employment is expected to print at 170k. A further softening in employment growth should be seen throughout 2020. The market also anticipates that the February ISM non-manufacturing index will fall by 0.6 – the prior Markit measure emphasised the US economy is not immune to the contagion.
Looking to the Federal Reserve, the Beige Book will be released (outlining conditions across the 12 Fed districts) while the Federal Reserve’s Evans will take part in a moderated Q&A.
Finally, market forecasters expect the Bank of Canada to respond to recent global developments and cut the policy rate by 25bps to 1.50% at their March meeting.
Sell the fact! Via the Fed:
The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. In light of these risks and in support of achieving its maximum employment and price stability goals, the Federal Open Market Committee decided today to lower the target range for the federal funds rate by 1/2 percentage point, to 1 to 1‑1/4 percent. The Committee is closely monitoring developments and their implications for the economic outlook and will use its tools and act as appropriate to support the economy.
Things were not helped by waffling drivel from the G7:
S. Treasury Secretary Steven T. Mnuchin and Federal Reserve Chair Jerome H. Powell led a call with the G7 Finance Ministers and Central Bank Governors to discuss the coronavirus disease 2019. At the conclusion of their meeting, they issued the following joint statement:
Washington – “We, G7 Finance Ministers and Central Bank Governors, are closely monitoring the spread of the coronavirus disease 2019 (COVID-19) and its impact on markets and economic conditions.
Given the potential impacts of COVID-19 on global growth, we reaffirm our commitment to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks. Alongside strengthening efforts to expand health services, G7 finance ministers are ready to take actions, including fiscal measures where appropriate, to aid in the response to the virus and support the economy during this phase. G7 central banks will continue to fulfill their mandates, thus supporting price stability and economic growth while maintaining the resilience of the financial system.
We welcome that the International Monetary Fund, the World Bank, and other international financial institutions stand ready to help member countries address the human tragedy and economic challenge posed by COVID-19 through the use of their available instruments to the fullest extent possible.
G7 Finance Ministers and Central Bank Governors stand ready to cooperate further on timely and effective measures.”
The Australian dollar battle is now joined. Alas, our own fools have, as usual, brought a spoon to a bazooka fight.
Even so, I do not think that the AUD lows are in. Australia will also end up with QE in short order. It’s just that for us it will come after the devastating economic bust not before.
Remember that as the northen hemisphere overcomes COVID-19 with the onset of summer, we will be descending into our own darkest nightmares of death and shut down with the onset of winter.
Likewise for the Australian dollar.
