The U.S. Federal Reserve said it would take step to bolster the economy and pass a stimulus package to offset the pandemic economic impact.
The severity of the spread of COVID-19 and the expectations of aggressive stimulus measures have been mirrored in financial markets.
The FED in an unprecedented move on Monday announced various programs. Such stimulus includes purchases of corporate bonds, guarantees for direct loans to companies and a plan to get credit to small and medium-sized business.
The Fed’s latest measures were seen to have effectively broken the spreading freeze in the dollar funding markets in the short term. However, the shock to the real economy is expected to last for a far longer period.
The U.S. Senate could pass a $2 trillion coronavirus economic stimulus package as soon as Tuesday, negotiators said. Analysts say is needed to blunt the economic harm from business shutdowns.
Wall Street was set to bounce from three-year lows on Tuesday, as signs of Washington nearing a deal on a $2 trillion economic rescue package gave a shot of optimism to markets.
Some more relief was also evident in dollar funding markets, with measures of short-term funding indicators.START TRADING
Forex – Stimulus Package by FED calms markets
Ιnvestors rushed to buy the U.S. dollar amid another round of panic about the economic hit from the coronavirus crisis.
Against a basket of its rivals, the dollar fell 0.42% to 101.71. It is down from a more than three-year high of 102.99 on Friday.
Against the dollar, the euro jumped 0.82% to $1.0809.
The Australian dollar gained 1.53% to $0.5916 AUD=, extending its recovery from a 17-year low of $0.5510 last week.
The British pound also rose 1.72% to $1.1747, up from a 35-year low of $1.1413 set last week.
Against the euro, the pound was 0.5% firmer at 92.54 pence – off last week’s lows of 95 pence.
Oil rose about 2% on Tuesday on Fed steps to support economy as well as hopes of U.S. aid package. The price of oil has halved in 2020, hit by the demand shock caused by the coronavirus pandemic and government restrictions to contain it.
Brent futures gained 77 cents, or 2.8%, to $27.79 a barrel by 10:33 a.m. EDT (1433 GMT). U.S. West Texas Intermediate (WTI) crude rose 10 cents, or 0.4%, to $23.46.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money