Although central banks taking drastic measures to restore confidence in markets and calm panicked investors, oil prices and stock markets continued to nose-dive.
The previous week investors cheered efforts made by governments and policymakers to address the economic fallout from the coronavirus outbreak.
The Fed cut interest rates by a full percentage point on Sunday to a target range of 0% to 0.25%, its second cut this month, and promised to expand its balance sheet by at least $700 billion in coming weeks. In a move to stem a market meltdown, the Federal Reserve rushed to a second emergency cut in U.S. interest rates in as many weeks — effectively to zero. This move added to last week’s aggressive action to stimulate the economy.
New Zealand’s central bank shocked by cutting rates 75 basis points to 0.25%. The Reserve Bank of Australia (RBA) pumped more money into its financial system.
However, the latest supportive drastic measures from all corners failed to quell coronavirus fears.
European stocks plunged close to 10% in brutal trading conditions that also sent volatility gauges surging to record highs. Further, Wall Street traders expect more major damage when U.S. markets reopen.
Oil, already reeling from a price war, slumped 11% to almost $30 a barrel, metals buckled. Even the traditional safe-haven gold dropped 5% as investors fretted about the impact its global demand.
Investors wanted to see evidence the Trump administration was responding vigorously and effectively to the public health challenges posed by the crisis.
Money markets are already pricing in nearly a 30% probability of a quarter-point rate cut at the BoE’s next policy meeting.
Japanese Prime Minister Shinzo Abe said G7 leaders would hold a teleconference at 1400 GMT to discuss the crisis.
START TRADINGForex – Drastic measures fail to restore confidence
Money markets digested a further surprise cut to U.S. rates to rock-bottom levels by the Fed in the face of the pandemic. Volatility, which had doubled in a few weeks, has subsided in both euro/dollar and across currencies, though it remained elevated.
The dollar was last down 1.9% on the Japanese yen at 106.01, marking its second-biggest fall since May 2017 following a bigger drop last week. Japan’s yen surged 2% on Monday with traders seeking cover in safe-haven currencies.
The commodity-exposed Australian dollar fell as much as 0.3% to $0.6166 while the New Zealand dollar slipped 0.2% to $0.6044.
The Swiss franc, another currency considered a safe haven, rose versus the dollar, with the dollar down 0.6% at 0.945 francs. The franc was unchanged versus the euro at 1.055 francs but near four-and-a-half-year highs.
The euro jumped 0.5% to $1.1168 after earlier reaching $1.124.
The pound bounced against the U.S. dollar but hit a new six-month low against the euro on Monday. The British currency was last up 0.6% against the U.S. dollar at $1.2355.
The pound performed less favourably versus the dollar than other currencies seen as safer havens. As a result sterling fell to a new six-month low against the single currency, last down at 90.95 pence per euro.
Brent fell by 10% on Monday, and U.S. crude to below $30, as emergency rate cuts by the U.S. Federal Reserve and its global counterparts failed to tame markets.
Brent crude was down $3.58, or 10.6%, to $30.27 a barrel by 1231 GMT. The front-month price had risen $1 earlier in the session. U.S. WTI crude was at $29.24, down $2.49 or 7.8%.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money