Key Points From This Week

Fed Makes Historic Rate Cut

In response to the escalating COVID-19 outbreak, the Fed made the unprecedented move of cutting interest rates to 0% at the start of the week. In another unscheduled move which came ahead of the March FOMC meeting, the Fed noted that it will also increase its bond buying program by $750 billion. These moves, which echo the announcements made during the global financial crisis, have highlighted the severity of the economic risk posed by COVID-19.

BOE Makes Surprise Rate Cut

Following on from last week’s rate cut, the BOE moved rates lower again this week down to 0.10%. This latest reduction came amidst expectations that the UK PM was to announce a lockdown in London. However, the PM stopped short of announcing any security measures and instead advised people to continue social distancing. Along with the rate cut, the BOE has also added to its QE program, ordering £200 billion to be printed to assist in its bind buying operations.

RBA, BOJ, & RBNZ Also Ease

We also saw policy adjustments from three other central banks this week with the RBNZ and RBA cutting rates and the RBA and BOJ announcing fresh QE measures. These moves mean that all banks in the G10 except for the SNB have now eased policy

Equities Continue To Plummet

Global asset prices have continued to crater lower this week, despite yet a further wave of central bank easing. The S&P500 has now traded below the 2315 level from earlier highs in the year above 3380. Asset prices have come under massive pressure to the soaring investor uncertainty which is fuelling a move out of riskier assets.

Key Events Next Week

European & UK PMIs

Next week the market will get the latest PMI data sets for a number of Eurozone nations and the UK. These readings will give an accurate measure of how COVID-19 has impacted activity over the last month and special attention will be paid to the manufacturing readings for the UK and Germany.

Keep An Eye On

UK Lockdown Announcement

There was a large expectation that a 15 day lockdown would be announced for London this week in line with various source comments made to media from those close to Downing Street. While the PM has so far stopped short of announcing a lockdown, he has not ruled out introducing such measures at a later date and, as such, the risk of a lockdown remains high. If a lockdown is announced in London this will have a strong bearish impact on UK asset prices and will further weigh on GBP.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 70% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.