The Friday Forex Takeaway – Episode 32

Trading Tips

Key Points From This Week

BOJ Eases Further

With the COIVD-19 crisis keeping many Japanese cities under lock-down, the economy continues to struggle. In a bid to address this, the BOJ took the unprecedented step this week of announcing that its bond purchase scheme will now be run at an unlimited level. Bond purchases were previously capped at around 80 trillion yen per year. The BOJ is also offering a 0.1% interest rate that utilise its new loan programme in order to increase commercial funding.

Fed issues Warning At FOMC

While the Fed held monetary policy on hold at its April meeting, as expected, it delivered a dire warning to the markets. The Fed noted that the COVID-19 crisis has dramatically weakened the US economy and warned that further weakness is likely to materialise in Q2. With this in mind, the Fed reassured investors that it stands ready to do more if necessary.

ECB Launches PELTROs

Despite the ongoing crisis in the Eurozone, the ECB held monetary policy steady this week also. Aside from some technical adjustments to the bank’s TLTRO programme, the ECB outlined its new PELTROs (pandemic emergency longer term refinancingoperations) which will provide additional non-targeted long term refinancing options for institution. Aside from this, no additional measures were announced though, as with the Fed, the ECB gave a stark warning over the risks from COVID-19 and reiterated its willingness to do more if necessary.

Key Events Next Week

RBA Rate Decision

The RBA meets next week though, given that Australia has suffered some of the lowest impact from the virus, and was the first to ease in response to it, no further measures are expected at this point. Traders will be keen to receive the bank’s latest assessment and outlook, however, for the RBA’s view on how the downturn in the global economy is affecting domestic activity.

BOE Rate Decision

The BOE rates meeting next week and, in line with the messages we have heard this week from the Fed and the ECB, no further adjustments are expected at this stage. However, the bank will be giving an update on the economy and traders can expect the bank to strike a dovish tone, warning of the likelihood of further easing to come – if needed.

US Labour Reports

The US labour reports will be closely watched on Friday. Following last month’s record plunge in the NFPs, traders will be looking to see if there has been any improvement, or if the downturn will have worsened. The Fed has warned of a continued rise in unemployment and, following last months 1% jump in the unemployment rate, there are plenty of risks around next week’s data.

Keep An Eye On

UK Lock-down Update

The UK government is expected to announce the outcome of its lock-down review next week and despite growing calls for the lock-down to eased, with the infection rate and death toll still elevated, the measures are likely to be extended further. If measures are extended further this will dampen the outlook for the UK economy and will likely see GBP lower in the short term.

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

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