Greenback rises to record highs as talks of a depression emerge
European stocks declined today as investors ignored the latest monetary easing policy by the ECB. Last night, the Christine Lagarde-led central bank launched a new aggressive monetary policy strategy. The bank will buy an extra €700 billion bonds, which will run through to the end of the year. The bank also decided to expand the range of assets that will be eligible for purchase. They will include commercial paper, which companies use to fund their operations. It will also ease its collateral standards to allow banks to raise money against their assets. The action led to an instant rebound in European debt markets but did little to boost share prices. The DAX, CAC, and FTSE indices declined by 1%, 0.70%, and 2.5% respectively.
The US dollar strengthened against the Swiss franc after the country’s central bank delivered its interest rates decision. The bank left interest rates unchanged at -0.75% as was widely expected. In the accompanying monetary policy statement, the bank said that Coronavirus was posing exceptionally large challenges for the country. The bank also said that it was intervening more robustly in the foreign exchange market to stabilize the economy. It also said that it was working closely with the government to provide fiscal relief to businesses.
The US dollar gained against most currencies as investors moved to safety. The dollar index, which measures the performance of the USD against a basket of currencies rose by more than 1.27%. Yesterday, the Fed announced that it was setting up a facility that would make loans to banks that are secured by assets from money market funds. Today, data from the Census Bureau showed that initial jobless claims rose to 281k last week. This was the highest level since 2017. The continuing claims increased to 1,710k. Meanwhile, data from the Philadelphia Fed showed that the manufacturing index declined to -12.7, the lowest level since 2013.
The USD/CHF pair rose to an intraday high of 0.9822 as the dollar strength prevailed. The price was the highest it has been since February 25. The momentum indicator has soared while the average directional movement index has risen to near 40. The price is along the upper line of the Bollinger Bands. The pair will likely continue rising during the American session.
The EUR/USD declined to its lowest level since 1985 after the ECB launched an aggressive asset purchases program. The pair reached a low of 1.0725, which is below the short, medium, and long-term moving averages. The price is also below the Ichimoku cloud while the RSI has moved to the oversold zone. The pair is likely to continue declining as investors move to the USD.
The GBP/USD declined to the lowest level since September 2016 after Michel Barnier announced that he had contracted Coronavirus. Barnier is the chief Brexit negotiator for the EU. This raises a likelihood of a no-deal Brexit unless the UK parliament changes its decision. The pair is trading below all short and medium-term moving averages on the four-hour chart. The momentum indicator has continued to fall while the average true range rose to a multi-month high. The pair is likely to continue falling in the American session.