April Central Banks Updates - Articles - Dukascopy Bank

Mon, 11 May 2020 15:21:07 GMT
Source: Dukascopy Bank SA
 

Central banks around the globe continue to implement ground-breaking monetary policies to support the economies during the coronavirus crisis.


Australia

On Tuesday, April 7, the Reserve Bank of Australia released its Rate Statement. The Australian policymakers decided to maintain the Cash Rate unchanged at the 0.25% level.

Moreover, the Bank announced it had bought around $36B of government bonds in secondary markets to support those markets.

Additionally, the Bank had injected substantial liquidity into the financial system through its daily open market operations to support credit to businesses and maintain low funding costs across the banking system.


Initial market reaction on RBA Rate Statement



Canada

On Wednesday, April 15, the Bank of Canada issued its Monetary Policy Report and Rate Statement. The Bank revealed it would continue to keep the Overnight Rate at 0.25%.

Moreover, the Canadian policymakers introduced new measures to support the Canadian financial system. The Bank "conducted lending operations to financial institutions and asset purchases in core funding markets amounting to around $200 billion."

The central bank announced it would continue to buy at least $5B worth of the government securities per week in the secondary market. Also, the Bank would temporarily increase the amount of Treasury Bills it received at auctions up to 40%.

Additionally, the Bank revealed the development if a new Provincial Bond Purchase Programme of up to $50B to supplement its Provincial Money Market Purchase Programme. Also, the Bank introduced a new Corporate Bond Purchase Programme - it would invest up to $10B in corporate bonds in the secondary market.


Fundamental analysis for USD/CAD: BOC Monetary Policy Report

Japan

On Monday, April 27, the Bank of Japan published its Monetary Policy Statement and Outlook Report. The Japanese central bank kept the Policy Rate steady at the -0.10% mark.

The Bank decided to maintain monetary easing through various actions. Firstly, the Japanese policymakers increased purchases of CP and corporate bonds up to ¥20T in total. Secondly, the Bank determined to strengthen the Special Funds-Supplying Operations to Facilitate Financing in Response to the Novel Coronavirus (COVID-19). Thirdly, the Bank would continue to purchase actively the government bonds (JGBs) and treasury discount bills (T-bills).


Initial market reaction on the release



The US

On Wednesday, April 29, the Federal Reserve released the FOMC Statement. The US policymakers decided to maintain the Federal Funds Rate unchanged at 0.25%.

According to the official release: "To support the flow of credit to households and businesses, the Federal Reserve will continue to purchase Treasury securities and agency residential and commercial mortgage-backed securities in the amounts needed to support smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions. In addition, the Open Market Desk will continue to offer large-scale overnight and term repurchase agreement operations. The Committee will closely monitor market conditions and is prepared to adjust its plans as appropriate."

On Thursday, April 30, the Fed revealed that it would expand the scope and eligibility for the Main Street Lending Programme to support the domestic economy through the coronavirus pandemic.

Fundamental analysis for EUR/USD: FOMC Statement


The EU

On Thursday, April 30, the European Central Bank issued its Monetary Policy Statement. The Bank decided to keep the Main Refinancing Rate on the 0.00% level.

Meanwhile, the Governing Council determined to lower the interest rate on TLTRO III operations during the period from June 2020 to June 2021 to 50 basis points below the average interest rate on the Eurosystem's main refinancing operations prevailing on the same period.

According to the official release: "A new series of non-targeted pandemic emergency longer-term refinancing operations (PELTROs) will be conducted to support liquidity conditions in the euro area financial system and contribute to preserving the smooth functioning of money markets by providing an effective liquidity backstop. The PELTROs consist of seven additional refinancing operations commencing in May 2020 and maturing in a staggered sequence between July and September 2021 in line with the duration of the collateral easing measures. They will be carried out as fixed rate tender procedures with full allotment, with an interest rate that is 25 basis points below the average rate on the main refinancing operations prevailing over the life of each PELTRO."

Moreover, the Bank would continue to follow the asset purchase programme (APP) at a monthly pace of €20B together with the additional purchase worth €120B until the end of the year.


Fundamental analysis for EUR/USD: EU Monetary Policy Statement

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