Morning Commentary: Europe pulls out the Big Guns

A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.

Europe pulls out the Big Guns Share this story: David Atkinson Foreign Exchange Sales Manager

We may have to redefine what it means to be an “unexpected” move by central banks and governments.  Certainly “emergency” rate cuts seem to be a common theme these days.  The Bank of England was the latest to issue an emergency rate cut of 50 basis points to take its benchmark interest rate from 0.75% to 0.25%.  The bank also announced a new program to provide cheaper and easier credit to help businesses and changes to its regulatory requirements to help ease the capital buffer for banks making it easier for them to lend.  This effectively makes for the third major central bank to make this move.  The Bank of Canada cut was technically at a regular meeting but was effectively an emergency cut since it was not expected until just days before the decision. Staying with the UK, Rishi Sunak, Chancellor of the Exchequer, presented the government’s budget for 2020 and included GBP 30 billion for fiscal stimulus, which will be focused on welfare, business support and sick pay changes.  Tomorrow will be interesting on the European continent.  The ECB started a two-day meeting today, with markets expecting a minimum of 10 basis points being “cut” from the already negative benchmark rate of -0.50%.  The bank will no doubt announce a similar set of measures as the Bank of England to help the lending process. US equities are down again today with the usual 2-3% moves.  US Treasury yields are back lower by what would usually be a volatile amount, but these days it looks tame.  Lastly, currencies are trading in remarkably tight ranges.

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