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South Korea reports lowest new coronavirus cases since peak

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    ActionForex
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    A piece of good news regarding the coronavirus pandemic is that South Korea on Monday reported its lowest number of new cases since the peak on February 29. The KCDC said there were only 64 new confirmed cases, taking the tally to 8961. Death toll rose by 1 to 110. The number of deaths stay at a relatively low level comparing to countries like Italy and Iran. It’s also the 12th straight days of new cases at around 100 or less, much better than the peak of 909. Also, 257 patients were released from hospital.

    Separately, Vice Finance Minister Kim Yong-beom said a new task force with be set up within the ministry. Special meetings will be held everyday to assess the situation and decide if more policy actions are needed to stabilize the financial markets. The government pledged to make all efforts to prevent extreme market volatility to turn into credit crunch.

    Australia enters lockdown as coronavirus cases surge

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      ActionForex
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      Australian government is starting lockdown measures as coronavirus spread accelerates in the country. Non-essential services, including indoor sporting venues, pubs, cinemas, bars and places of worship will be closed from midday Monday.  A total of 1642 confirmed cases are reported in the country now, with 669 in New South Wales, 355 in Victoria and 319 in Queensland, 140 in Western Australia, and 100 in Southern Australia. Death tolls remain low at 7.

      Prime Minister Scott Morrison warned this is the “toughest year of our lives” and the lock down could last six months. Several Australian states have take even stronger measures. Western Australia and South Australia announcing tighter border restrictions at the weekend. Victoria closes all schools starts from Tuesday.

      Separately, the Australian Prudential Regulation Authority (APRA), banking watchdog, said banks must account for possible loss form loan repayment holidays they offered to those affected by the coronavirus outbreak. And, banks must publicly disclose the volume of such loans. Last week, banks announced coronavirus support packages that provide borrowers with an option to defer repayment for up to six months. These packages target mainly small businesses and home loan customers affected by the coronavirus outbreak.

      RBNZ starts NSD 30B QE, financial taps turned on, country goes into self-isolation

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        ActionForex
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        RBNZ announced today to launch a NZD 30B Large Scale Asset Purchase (LASP) program of government bonds. The purchases will be “across a range of maturities” in the secondary market over the next 12 months. It aims to “provide further support to the economy, build confidence, and keep interest rates on government bonds low.” RBNZ will monitor the effectiveness and “make adjustments and additions” if needed.

        Over the weekend, Governor Adrian Orr said in an article that “the evolving coronavirus outbreak has unsettled communities around the world, creating uncertainty about the future.” “New Zealand is no exception” but “we start in the best possible relative position”. The central bank already cut the Official Cash Rate form 1.00% to 0.25% and remains “committed to keep it there for at least the next year”. He added, “we are ready to act further, with more firepower in reserve to keep the financial taps turned on.”

        Separately, Prime Minister Jacinda Ardern announced today that the country is “now preparing to go into self isolation”. All non-essential services, schools and offices will be shut over the next 48 hours. Supermarkets and pharmacies will remain open.

        Canada retail sales rose 0.4% in Jan, coronavirus impact to come later

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          ActionForex
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          Canada retail sales rose 0.4% to CAD 5.2B in January, slightly above expectation of 0.3% mom. Ex-auto sales, however, dropped -0.1% mom, versus expectation of 0.2% mom. Sales were up in only 4 of 11 subsectors, representing 48% of retail trade.

          Statistics Canada also noted: “While the impacts of the coronavirus on the retail trade sector will be more noticeable in subsequent months, respondent comments for February note that business activities have been impacted.”

          Full release here.

          ECB policymakers push common fiscal responses from governments

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            ActionForex
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            ECB Governing Council Member Olli Rehn said that Eurozone is now at a “critical juncture” with the coronavirus pandemic. It is “essential for Eurozone governments to “get their acts together and agree to a coordinated European fiscal response.” “There’s a saying: never waste a crisis. Therefore it’s important that euro area governments agree at this critical moment on some kind of a safe asset that could provide sturdy support for financing,” he added.

            Another Governing Council member Pablo Hernandez de Cos also called for a common fiscal response using the European Stability Mechanism, the European Investment Bank, the EU’s common budget or other “risk sharing” tools. He urged, “greater ambition and coordination are not just an option; they are a necessity.”

            Italy pushes new EU bonds to fight against coronavirus economic impacts

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              ActionForex
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              Italian Economy Minister Roberto Gualtieri urges EU to issue new bonds to help the member states fighting impact of the coronavirus. He told newspaper Il Corriere della Sera, “we should foresee the issue of European securities that can be used by each country under the same conditions and must be related to the fight against coronavirus and its economic consequences.”

              “We are facing a symmetrical shock that affects everyone and therefore we need to use the tools we have in an innovative way,” he added.

              While he priced ECB’s move, Gualtieri also emphasized that monetary policy alone is not enough. “We must have the courage to put in place a common and coordinated budgetary policy capable of supporting the effort of our health systems,” he said.

              RBNZ announces measures for to support financial system functioning

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                ActionForex
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                RBNZ announces a package of measures to support financial system functioning during the coronavirus pandemic. A Term Auction Facility is set up to give banks access to term funding, with collateralized loans available out to a term of 12 months. That should alleviate pressures in the funding markets. Other measures include funding in the fx swap markets, re-establishment of a USD swap line, supporting liquidity in the government market, and measures to have a greater control over short-term interest rates.

                “The measures we are implementing today provide additional support to domestic financial markets. We will ensure our operations make financial markets operate smoothly,” Assistant Governor Christian Hawkesby said. “We are working in tandem with the banks, the wider financial market community, and the Government.”

                Fed Daly: Our tools are starting to work in the market

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                  ActionForex
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                  San Francisco Fed President Mary Daly said in an interview that it’s “absolutely appropriate” to have Fed working with fiscal agents to help small businesses and households to “weather this near term shutdown” due to coronavirus. The fiscal stimulus from Congress and the response moves by Fed this week are “exactly what we need to do to offset some of the near-term disruption”.

                  She noted that Fed’s tools are “starting the work in the market we care about”. “It’s encouraging to see that there’s more borrowing at the discount window; it’s encouraging to see that some of the volatility in markets has settled down,” Daly said.

                  BoE cut rate to 0.10%, expand asset purchase by GBP 200B

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                    ActionForex
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                    After a special meeting, BoE announces to cut Bank rate by -15bps to 0.10%. Also, Asset purchase target is raised by GBP 200B to GBP 645B. BoE will also enlarge the TFSME schedule  financed by the issuance of central bank reserves.

                    BoE said in the statement: “Over recent days, and in common with a number of other advanced economy bond markets, conditions in the UK gilt market have deteriorated as investors have sought shorter-dated instruments that are closer substitutes for highly liquid central bank reserves.  As a consequence, UK and global financial conditions have tightened.”

                    Full statement here.

                    US initial jobless claims jumped 70k to 281k, clearly attributable to coronavirus impacts

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                      ActionForex
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                      US initial jobless claims rose 70k to 281k in the week ending March 14, well above expectation of 220k. It was also the highest reading since September 2017. Four-week moving average of initial claims rose 16.5k to 232.25. Continuing claims rose 2k to 1.701m in the week ending March 7. Four-week moving average of continuing claims dropped -7k to 1.703m.

                      DOL said, “During the week ending March 14, the increase in initial claims are clearly attributable to impacts from the COVID-19 virus. A number of states specifically cited COVID-19 related layoffs, while many states reported increased layoffs in service related industries broadly and in the accommodation and food services industries specifically, as well as in the transportation and warehousing industry, whether COVID-19 was identified directly or not.”

                      Full release here.

                      Ifo: German economy could shrank -1.5% this year in better case scenario

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                        ActionForex
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                        Ifo institute said in its spring forecast that the global economy is “collapsing” as a result of coronavirus pandemic. Global GDP would grow only 0.1% this year, comparing with 2.6% last year. World trade would see a decline of -1.7%. There are also “considerable” downside risks in the forecast.

                        German economy could shrink by -1.5% this year. That could reduce growth rate by almost -3%, comparing with a situation without the outbreak. The full effect of the coronavirus crisis will be seen in Q2, leading to -4.5% contraction in GDP. By first half of 2021, production of goods and services should then “gradually return to a normal level”. In a second scenario, which includes bigger production restrictions, economic output will shrink by -6%

                        SNB Jordan: Key coronavirus measures are medical and fiscal, not monetary policy

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                          ActionForex
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                          SNB Chairman Thomas Jordan emphasized today key coronavirus measures “do not come from central banks”. Instead, they come from “medical measures and also from the fiscal side”.

                          For the central bank, “we have to provide the financial system with enough liquidity to ensure the credit flow to the economy does not dry up…so firms can survive this very difficult situation.”

                          SNB stands pat at -0.75%, expects negative inflation and growth this year

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                            ActionForex
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                            SNB kept sign deposit rate unchanged at -0.75% today. It noted that coronavirus is posing “exceptionally large challengers” for Switzerland, and the expansionary monetary policy is “more necessary than ever” for ensuring appropriate monetary conditions. The central bank is “intervening more strong” in the FX markets to stabilize the situation. Both negative interest and interventions are “necessary to reduce the attractiveness of Swiss franc investments”.

                            Additionally, SNB is raising the exemption threshold as of April 2020 to reduce the negative interest burden on the banking system. The threshold factors will increase from 25 to 30. It’s also examining whether a “relaxation of countercyclical buffer” would be possible.

                            New conditional inflation forecast is lowered primarily due to “lower oil prices, significantly weaker growth prospects and stronger Swiss franc”. Inflation is expected to be in slightly negative territory at -0.3% this year, turned slightly positive to 0.3% in 2021, then rise to 0.7% in 2022. Growth is “likely to be negative” for 2020 as a whole.

                            Full release here.

                            ECB wins European praises as Italian yields fall too

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                              ActionForex
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                              ECB’s massive EUR 750B Pandemic Emergency Purchase Programme announced overnight won praises from top European politicians. French President Emmanuel Macron said he gives “full support for the exceptional measures taken this evening by the ECB.” He added,”it is now up to us, the European states, to step up to the plate via our budgetary interventions and to show a bigger financial solidarity at the heart of the euro zone.”

                              Also from France, Finance Minister Bruno Le Maire said “The plan that the European Central Bank announced is the right one… It’s a massive plan because it foresees 750 billion euros ($813 billion) in asset purchases, it will have a strong economic impact because it will allow companies to be better financed and it will have a major political impact, it will reduce the risk of fragmentation in the euro zone.”

                              Germany’s Economy Minister Peter Altmaier also said, “I hope these measures will also make it clear to the stock markets, to the markets today that Europe will protect its interests and Europe is determined to overcome this crisis”.

                              The steep fall in Italian bond yield today is also a strong vote of confidence for the ECB. 10-year yield hit as high as 2.961 yesterday but it’s now back at around 1.6.

                              RBA cuts rate to 0.25%, starts government bond purchases

                                By
                                ActionForex
                                -

                                RBA announces a package of coronavirus response today. Firstly, cash rate is cut by 25bps to 0.25%. Additionally, the central bank will start purchases of government bonds to keep 3 year yield at around 0.25%, starting tomorrow. A three-year funding facility will also be set up to provide credit support to small and medium-sized businesses. Lastly, exchange settlement balances will be remunerated at 10 basis points, instead of zero.

                                The central said, “the various elements of this package reinforce one another and will help to lower funding costs across the economy and support the provision of credit, especially to small and medium-sized businesses.” “Today’s policy package from the Reserve Bank complements the welcome fiscal response from governments in Australia. Together, these measures will support jobs, incomes and businesses through this difficult period and they will also assist the Australian economy in the recovery.”

                                Full statement here.

                                Fed Kashkari: Coronavirus impacts potentially even worse than financial crisis

                                  By
                                  ActionForex
                                  -

                                  Minneapolis Fed President Neel Kashkari “how the virus progresses is really going to determine what the ultimate economic impact is”. He’s rather pessimistic, noting “it unfortunately could be devastating, like the financial crisis, or potentially even worse.”

                                  Meanwhile, he told the Congress that “speed is of the essence here”. “Whatever Congress is going to do, the faster they can do it, and the more aggressively they can do it, the more people we can help.”

                                  US passed second coronavirus response package, more to come

                                    By
                                    ActionForex
                                    -

                                    US Senate passed the second major coronavirus response bill overnight, which include paid sick leave, food assistance and financial help for coronavirus testeing. President Donald Trump quickly signed the measure hourse after the vote. Republican and Democratic leaders are already working on the third proposal.

                                    Senate Majority Leader Mitch McConnell, after passing the vote, “the Senate’s going to stay in session until we finish phase three, the next bill, and send it over to the House.” He said he couldn’t predict when a bill will be ready for a vote, but “we are moving rapidly because the situation demands it.”

                                    ECB launches EUR 750B Pandemic Emergency Purchase, will considering lifting self-impose limits

                                      By
                                      ActionForex
                                      -

                                      In a unexpected move, ECB announced a massive EUR 750B Pandemic Emergency Purchase Programme (PEPP). The temporary program is for countering the “serious risks to monetary policy transmission mechanism” and the economy outlook posed by “outbreak and escalating diffusion” of the coronavirus. Purchases of private and public sector securities will be conducted until the end of 2020, including all asset categories under the existing APP.

                                      ECB Governing Council pledged to “ensure that all sectors of the economy can benefit from the supportive financing conditions that enable them to absorb this shock”. Also, it’s “fully prepared to increase the size” of the purchases and adjust the composition, “by as much as necessary and for as long as needed”. The central bank will also consider to revise the “self-imposed limits” that might hamper its actions.

                                      “Extraordinary times require extraordinary action,” ECB President Christine Lagarde said. “There are no limits to our commitment to the euro. We are determined to use the full potential of our tools, within our mandate.”

                                      Euro recovers mildly against Dollar and Yen after the unexpected announcement. But upside is so far limited.

                                      US oil inventories rose 2.0m barrels, WTI weak after breaking key support

                                        By
                                        ActionForex
                                        -

                                        US commercial crude oil inventories rose 2.0m barrels in the week ending March 13, below expectation 3.5m barrels. At 453.7m barrels, inventories are about 3% below the five year average for this time of year.

                                        WTI crude oil break through 27.69/50 key support level today and stays weak after the release. Near term outlook will now stay bearish as long as 36.54 resistance. WTI should be taking long term support zone between 10.65 and 17.12 made between 1998/2001.

                                        Canada CPI slowed to 2.2%, impact of coronavirus to be more deeply felt in subsequent months

                                          By
                                          ActionForex
                                          -

                                          Canada CPI slowed to 2.2% yoy in February, down from 2.4% yoy, but beat expectation of 2.1% yoy. CPI common was unchanged at 1.8% yoy, matched expectations. CPI median slowed to 2.1% yoy, down from 2.2% yoy, missed expectation of 2.2% yoy. CPI trimmed slowed to 2.0% yoy, down from 2.1% yoy, missed expectation of 2.1% yoy.

                                          Statistics Canada commented on the impact of coronavirus on CPI. Flight suspensions, travel advisories and cancellations of public evens may leader to lower prices for trave services. Crude oil prices tumbled due to slow down in activity and travel, as well as tensions between oil-producing nations. Also, there are supply chain disruptions, closure of stores and services, lower interest rates and slowing of economic activity. “The price effects of the outbreak could be more deeply felt in subsequent months.”

                                          Full release here.

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