US Federal Reserve Unveils Drastic New Strategy
US Federal Reserve Unveils Drastic New Strategy
Yesterday, the US Federal Reserve announced extensive new measures in order to help the US economy. This included a new asset purchase program, which included the purchasing of corporate bonds for the first time since the 2008 financial crisis.
These announcements were able to stop most of the day’s losses, but the US stock indices still managed to finish the day in the red, with the Dow Jones Industrial Average closing at a 3% loss, and the NASDAQ and S&P 500 also in the negatives.
Essentially, the US Federal Reserve has expressed that they are ready to spend an unlimited amount of money on bond purchases in order to try keep the economy afloat. This includes printing new money as needed.
In their press release, the Fed highlighted that their biggest priorities were to stop the loss of jobs in both the private as well as public sector, as well as to ensure a swift recovery to the economy once the virus pandemic settles.
This level and scale of intervention is something that has not been seen from the Federal Reserve since the 2008 recession. However, despite this massive amount of support, the US economy seems to be showing no signs of recovery for the time being.
The deciding factor now is next month’s NFP, or non-farm payroll data. This will measure how many jobs have been lost due to the impact of the coronavirus, and just how much trouble the US economy is really in.
While stock indices have fallen into the pattern of having a day of recovery after a big loss, they still inevitably continue to push lower and lower, with the Dow currently still trading below 20,000 points.
Large parts of the US are now under lockdown, with the citizens of California, New York, and other states all under similarly heavy lockdowns and being urged to stay at home.
Despite these drastic measures, there have also been concerns that the US government is not doing enough to prop up the economy.
For the second day in a row, Senate Democrats have once again moved to stop the coronavirus bill from being passed, citing concerns over how exactly big businesses would use this bailout money. This almost $2 trillion economic stimulus package, which was proposed by the Senate Republicans, is also an attempt to help businesses from losing money and employees from losing their jobs. Part of this plan is a proposed $1,200 check going to all US citizens, with those earning above $99,000 not being eligible to receive it. Democrats also opposed this part of the plan with concerns that it was not enough.
For more information on the movement of the markets during the previous week, as well as how we are moving forward as we start working from home, watch our latest Monday Meetings video here, and follow us on Instagram and Twitter.
The Euro sees its longest streak in 15 years on the back of Christine Lagarde, announcing that the ECB will provide an extra $1T in stimulus to combat the effects of the Coronavirus. The Euro against the USD has spiked to 1.127 to just under 1.135 on the back of extra stimulus. Pointing to inflation and price stability as concerns, Christine Lagarde stated a “unanimous view that action had to be taken.” However, with over six years of Quantitative easing and negative rates, the Euro’s weakness has benefited its exporters. This may change as the ECB puts its foot down in trying to rescue Europe.
New Zealand has had no new Coronavirus cases in the past 13 days. America is about to top 105,000 cases. New Zealand went hard and fast. The United States Is barely squashing the curve. New Zealand is in the phase were politicians are arguing when to remove all restrictions. America is reopening to save a dwindling election. A stark contrast in the environment between the two countries. However, one thing remained constant – the returns in the major indices between both countries.
The US Dollar index weakens for the 7th straight day as investors’ appetite for risk increases. The AUD/USD has broken the 0.69 mark, with the USD weaker against its G10 currencies, with global indices rising on forward optimism on a quicker recovery from the effects of the Coronavirus. US Indices have seemed to quickly discount the effects of the protests as they continue for the 8th straight day.
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