Australia
On March 2, the policy of the bank remained unchanged. "The Board of the Reserve Bank of Australia decided to maintain the current policy settings, including the targets of 10 basis points for the cash rate and the yield on the 3-year Australian Government bond, as well as the parameters of the Term Funding Facility and the government bond purchase program." However, the bank revealed that it could create more money by buying additional bonds. Namely, as stated in the official statement: "The Bank is prepared to make further adjustments to its purchases in response to market conditions. To date, a cumulative $74 billion of government bonds issued by the Australian Government and the states and territories have been purchased under the initial $100 billion program. A further $100 billion will be purchased following the completion of the initial program and the Bank is prepared to do more if that is necessary. Authorised deposit-taking institutions have drawn $91 billion under the Term Funding Facility and have access to a further $94 billion. Since the start of 2020, the RBA's balance sheet has increased by around $175 billion."Statement by Philip Lowe, Governor: Monetary Policy Decision
The announcement caused a 30 pip move on the AUD/USD over a span of 30 minutes. Afterwards, the rate returned back to previous levels. Initial reaction on the market:Canada
On March 10, the Reserve Bank of Canada maintained their policy unchanged. Both interest rates and quantitative easing remained unchanged. From the statement: "The Bank of Canada today held its target for the overnight rate at the effective lower bound of ¼ percent, with the Bank Rate at ½ percent and the deposit rate at ¼ percent. The Bank is maintaining its extraordinary forward guidance, reinforced and supplemented by its quantitative easing (QE) program, which continues at its current pace of at least $4 billion per week." Although, there is something addition to note from the statement: "We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. In the Bank's January projection, this does not happen until into 2023. To reinforce this commitment and keep interest rates low across the yield curve, the Bank will continue its QE program until the recovery is well underway." Namely, the central bank could continue their stimulus as long as 2023. It would mean the continuous growth of all Canadian Dollar denominated asset prices. The announcement did not cause a surge of volatility. It occurred in the middle of a minor surge, which was taking place prior to the release. The release added additional 26 pips to the move upwards. Afterwards, the USD/CAD resumed its previous downwards trend. Initial reaction on the market:European Union
The ECB made a monetary policy statement and hosted a press conference on March 11. "To conduct net asset purchases under the pandemic emergency purchase programme (PEPP) with a total envelope of €1,850 billion until at least the end of March 2022. The Governing Council expects purchases under the PEPP over the next quarter to be conducted at a significantly higher pace than during the first months of this year." Namely, expect the increase of the money supply to occur at a faster pace. Namely, the EUR supply should increase and the EUR should lose value against currencies that would remain stable or even increase in value. "Second, net purchases under our asset purchase programme (APP) will continue at a monthly pace of €20 billion. We continue to expect monthly net asset purchases under the APP to run for as long as necessary to reinforce the accommodative impact of our policy rates, and to end shortly before we start raising the key ECB interest rates" Do not expect interest rates to change in Europe until the purchasing program is cancelled as a monetary tool. Due to that reason, it is suggested that market participants concentrate on the programs instead of interest rates.Transcript of Press Conference.
Prior to the event, EUR/USD volatility disappeared, as the rate traded almost flat for four hours. As the statement was made, volatility returned. Afterwards, a move happened only as the press conference occurred. In total, the EUR/USD lost 34 pips due to the event. However, note that later on the rate recovered in a 60 base point surge. Initial reaction on the market:United States of America
On March 17, at 18:00 GMT the Federal Reserve published the Federal Open Markets Committee Economic Projections, Statement and published the Federal Funds Rate. Afterwards, at 18:30 GMT, a follow-up press conference was hosted. In general, the statement revealed that US interest rate hikes are not to be expected. In addition, the Fed is set to continue its monetary stimulus until it sees actual economic recovery instead of just forecasts of recovery. These announcements caused a broad drop of the USD. From the official statement: "The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time." In regards to quantitative easing: "In addition, the Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month." Combine this information with the announcement of another central bank and one can make predictions for a currency exchange rate. For example, the ECB increased their pace on March 11 and the Fed did not change their policy. This has resulted in a 2.17% decline of the EUR/USD since March 11 up to the time of the creation of this article.Federal Reserve issues FOMC statement
On Wednesday, at 18:00 GMT, the EUR/USD surged, as the US Federal Reserve Federal Open Market Committee issued a monetary policy statement. The currency exchange rate surged 73 pips or 0.61% in the span of 40 minutes following the release. Initial reaction on the market:England
On March 18, at 12:00 GMT the Bank of England released its Monetary Policy Summary and announced the Official Bank Rate. "The Bank of England's Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. At its meeting ending on 17 March 2021, the Committee judged that the existing stance of monetary policy remains appropriate. The MPC voted unanimously to maintain Bank Rate at 0.1%." "The Committee voted unanimously for the Bank of England to maintain the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, at £20 billion." "The Committee voted unanimously for the Bank of England to continue with its existing programme of UK government bond purchases, financed by the issuance of central bank reserves, maintaining the target for the stock of these government bond purchases at £875 billion and so the total target stock of asset purchases at £895 billion." The Bank of England kept all aspects of their monetary policy unchanged. The money supply is set to increase. However, at the same pace as before. Due to that reason, the GBP's value should remain stable. Meanwhile, there were hints in regards to the future. "As has been the case in recent MPC projections, CPI inflation is expected to return swiftly to around the 2% target in the spring." and "The Committee does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably." Namely, the monetary policy of the bank could change in late spring, if inflation picks up. Market participants should watch the official UK Consumer Price Indices for clues, when a rate hike or decrease of quantitative easing would occur.Monetary Policy Summary and minutes of the Monetary Policy Committee meeting
The GBP/USD declined 61 base points or 0.44% in the aftermath of the release. However, the decline was part of a three hour decline, which began one hour prior to the Bank's statements. It could have occurred due to the markets already expecting no changes in the policy of the bank. Initial reaction on the market:Japan
On March 19, the Bank of Japan published a Monetary Policy Statement and hosted a Press Conference. In general, the bank announced that it would continue its monetary easing policy. In regards to interest rates, the bank decided. "The short-term policy interest rate: The Bank will apply a negative interest rate of minus 0.1 percent to the Policy-Rate Balances in current accounts held by financial institutions at the Bank. " "The long-term interest rate: The Bank will purchase a necessary amount of Japanese Government Bonds without setting an upper limit so that 10-year JGB yields will remain at around zero percent." "With regard to asset purchases other than JGB purchases, the Bank decided, by a unanimous vote, to set the following guidelines." "The Bank will purchase ETFs and J-REITs as necessary with upper limits of about 12 trillion yen and about 180 billion yen, respectively, on annual paces of increase in their amounts outstanding." "The Bank will purchase CP and corporate bonds with an upper limit on the amount outstanding of about 20 trillion yen in total until the end of September 2021." In addition, the central bank made comments on future monetary policy. Namely, it would continue to use the current tools as previously until the target inflation of 2% is achieved.Further Effective and Sustainable Monetary Easing
Due to the publication, the USD/JPY increased its volatility to a range of 22 pips. Although, after fifteen minutes, the currency exchange rate returned to the previous descending trend. Initial reaction on the market:Switzerland
On March 25, at 08:30 GMT, the Swiss National Bank made a rate statement and published the bank's Monetary Policy Assessment. Take into account that the SNB does not release the numbers for their operations except the deposit rate at the SNB. The rate was left unchanged at -0.75%. In the meantime, the bank did provide commentary on other tools, which indicated that the bank's policy would remain unchanged. "The SNB is keeping the SNB policy rate and interest on sight deposits at the SNB at −0.75%. It remains willing to intervene in the foreign exchange market as necessary, while taking the overall currency situation into consideration. It is also continuing to supply the banking system with liquidity on generous terms. The SNB's expansionary monetary policy provides favourable financing conditions, counters upward pressure on the Swiss franc, and contributes to an appropriate supply of credit and liquidity to the economy." Note this part: "counters upward pressure on the Swiss franc." The central bank is clearly stating that it wishes the Swiss Franc to decline. It had made statements about the overvalued Swiss Franc since the unpegging of the CHF from the EUR in early 2015. However, from April 2019 up to December 2020, the USD/CHF had declined by almost 15.00%. A decline occurred in a major channel down pattern, which guided the rate since the start of 2019. Most recently, during the first quarter of 2021, the rate recovered more than 7.00% and broke the upper trend line of the pattern. It appears that since January 2021 the SNB has managed to succeed and intends to continue to beat down the value of the CHF. The event itself caused an eleven pip bounce downwards on the five minute candle chart. The rate had recovered from it after fifteen minutes. Initial reaction on the market: