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US Dollar Falls After Fed Cuts Rates to Zero and Launches QE

US Dollar Falls After Fed Cuts Rates to Zero and Launches QE

2020-03-15 22:00:00
Dimitri Zabelin, Analyst
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US Dollar, FOMC, Fed Cuts Rates to Zero, QE – TALKING POINTS

  • The US Dollar edged lower after the Fed cut interest rates to zero
  • Monetary authorities launched $700bn quantitative easing program
  • Markets anxiously await Fed Chair Powell presser at 22:00 GMT

The US Dollar fell after the Federal Reserve slashed the target range for its benchmark Fed Funds interest rate to 0.00-0.25 percent and announced an asset purchase effort totaling $700 billion. The central bank intends to buy Treasuries ($500 billion) and mortgage-backed securities ($200 billion). It has also opened swap lines with five major central banks - the ECB, BOE, BOJ, BOE and SNB – to bring down the costs of USD liquidity and shake loose credit markets seized up in the panic.

US Dollar Index – 15-Minute Chart

Chart showing US Dollar Index

USD Index chart created using TradingView

Officials stated that they will hold rates near zero until they are confident that the economy is no longer vulnerable to a downturn caused by the coronavirus. They added that the Fed stands ready to use the full range of tools at its disposal to support credit access. They pledged to act as appropriate to support the economy but warned that the effects of COVID-19 will weigh on economic activity in the near term.

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This comes after the Fed caught markets off-guard and unexpectedly cut interest rates by 50 basis points outside of its regularly scheduled meetings earlier this month. The last time the US central bank implemented a maneuver like that was during the 2008 financial crisis following the collapse of Lehman Brothers. Looking ahead, investors will be closely watching Fed Chair Jerome Powell’s press briefing at 22:00 GMT.

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--- Written by Dimitri Zabelin, Jr Currency Analyst for DailyFX.com

To contact Dimitri, use the comments section below or @ZabelinDimitrion Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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