Kiwi bounces overnight as US dollar falters in face of record stimulus

Key Movers

The US dollar fell through trade on Monday after the Fed announced unprecedented monetary policy stimulus measures designed to sure up the domestic economy and cushion the impact of the looming recession. The Federal reserve announced new programs wherein it will lend against student loans, credit cards and small businesses, while supporting larger employers in maintaining as much of the domestic workforce as possible. The Fed will also expand its purchase of mortgage backed securities to help normalise market function, doing everything it can to help guide the economy through this unmatched period of uncertainty. While broader markets remain reluctant to buy back into risk assets we expect haven plays will remain popular through the short and medium term. That said we would expect the record levels of central bank and government stimulus to bite at some point. As congress passes a 2 trillion dollar stimulus package we expect confidence among investors will improve, perhaps weighing on the USD and fostering a correction of the recent overshoot.Sterling’s meteoric collapse continued through trade on Monday as investors dropped the currency amid coronavirus concerns. The Pound slipped back below 1.15 and edged nearer last week’s low of 1.1413. Investors are reluctant to hold onto the GBP as current account concerns and fears Britain’s approach to dealing with the coronavirus outbreak will mean a prolonged and disjointed disruption to economic performance. With recent moves primarily across short positions there is still scope for a deeper depreciation as normal market function resumes and investors begin assessing net long balances. Watch support at 35 year lows with a break potentially signaling another run on pound.