Early Fed rate cut sparks market anxiety, Dollar on the defensive

04.03.2020 - Petr Mazaylo
Early Fed rate cut sparks market anxiety, Dollar on the defensive

Early Fed rate cut sparks market anxiety, Dollar on the defensive

The U.S. Dollar on Wednesday after an early Federal Reserve cut rates by 50 basis points, sparking anxiety within the markets about the impact of the virus.

The Fed move came as a surprise to investors as the cut came 2 weeks ahead of a regularly scheduled policy meeting. This resulted in the Greenback nearing 5-month lows against the Japanese Yen while it hovered near the lowest in 2 years against the Swiss Franc.

Investors have been fleeing to safe haven assets as rate cuts were seen as insubstantial to soften the economic disruption caused by the global outbreak of the novel coronavirus. Among most currencies, the Euro was one to benefit from the Dollar’s decline after investors speculated that Fed cuts would outnumber those of the European Central Bank.

Furthermore, a bleak view perceived toward G7 strengthened after a statement on Tuesday failed to specifically respond to the global economic slowdown brought about by the spread of the virus.  

“The G7 and the Fed were not enough to support markets,” said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.

“This Fed rate cut is bad for dollar/yen, partly because Treasury yields are now very low. The dollar’s weakness is reflected in the euro, because the Fed will likely ease more than the ECB.”

Risk disclaimer "PROMETHEUS LTD – Trust Company Complex, Ajeltake Road, Ajeltake Island, Majuro, Republic of the Marshall Islands MH96960 is a financial services institution outside the European Union Area, which is subject to the supervision of the IFMRRC Certificate 0395 AA V0155 Trading in Forex/ CFDs and Other Derivatives is highly speculative and carries a high level of risk. It is possible to lose all your capital. 70% of trading deals can be unprofitable. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent advice if necessary. Speculate only with funds that you can afford to lose. This Website may contain information in particular regarding financial services and products that could be regarded b a E.U. supervisory authority as an offer of financial services targeted in Europe. ESMA intervention measures do not apply to customers of PROMETHEUS LTD and it is your responsibility to choose a company which is most suitable for your trading needs. By clicking continue you confirm that you have read, understood and agree to the risk disclosures, terms of service, cash policies, privacy policies and this notice and that you are visiting this website on your own initiative, without any encouragement whatsoever from umarkets.ai or PROMETHEUS LTD." Cookies notification: We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we assume that you are happy with it. Read more. Continue
×

Help with deposit?