Author : Steve Oram
The Aussie Dollar opens higher today as the US Dollar dropped after the US Federal Reserve took unprecedented steps to backstop the US economy. The AUD had weakened yesterday after additional measures announced by the government on the weekend weighed on sentiment. Technical analysis had shown it was largely over sold on recent falls so was due some respite overnight. Global risk assets remain under pressure though, despite a ramp up in central bank and government support measures, the AUD could resume its downward path later in the week if key support is tested.
US Fed Launches All-In Effort
The US Federal Reserve said it will buy an unlimited amount of government debt, as well as corporate and municipal bonds, in the biggest expansion of it’s balance sheet in history. A statement this morning said “aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate”. US Stocks rallied on the news before giving back these gains later in trading, while the greenback has weakened after earlier trading at three week highs against major currencies.
US Government Debates Stimulus Package
As the global economy comes to a jarring halt, governments around the world are scrambling to inject fiscal stimulus into the system to limit the economic damage of the coronavirus. In the US, lawmakers are set to vote again today on an astronomical $1 trillion-plus stimulus package, but Senate Democrats and Republicans have yet to come to an agreement on what will be included. Yesterday, Democrats voted against advancing the bill which they deemed too focused on corporate bailouts and not enough on healthcare workers, hospitals, and state/local government support. With US stocks in free fall, and President Trump breathing down their necks, the expectation is that some sort of deal will eventually get done. The question is if it can’t get done soon, will it be too late?
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