June Central Banks Updates - Articles - Dukascopy Bank

Mon, 29 Jun 2020 15:47:55 GMT
Source: Dukascopy Bank SA
 

It appears that central banks around the globe continue to take action and implement ground-breaking monetary policies to support the economies during the coronavirus crisis.

Australia

On Tuesday, June 2, the Reserve Bank of Australia issued its Rate Statement. The Australian policymakers decided to maintain the cash rate and yield on the three-year Australian Government bonds of 0.25%.

The Bank stated that it had purchased government bonds only once since the previous meeting, with total purchases date of around $50B. The Bank was prepared to increase its bond purchases again if it was necessary to support financial markets.

Moreover, the Bank announced that authorised deposit-taking institutions were making use of the Term Funding Facility, with total drawing to date of around $6B. The institutions would likely continue to use the facility over coming months.

Fundamental analysis for AUD/USD: RBA Rate Statement

Canada

On Wednesday, June 3, the Bank of Canada released the Rate Statement, with the Overnight Rate maintaining/remaining unchanged at 0.25%.

According to the official release: "The Bank's programs to improve market function are having their intended effect. After significant strains in March, short-term funding conditions have improved. Therefore, the Bank is reducing the frequency of its term repo operations to once per week, and its program to purchase bankers' acceptances to bi-weekly operations. The Bank stands ready to adjust these programs if market conditions warrant. Meanwhile, its other programs to purchase federal, provincial, and corporate debt are continuing at their present frequency and scope."

Fundamental analysis for USD/CAD: BOC Rate Statement

The European Union

On Thursday, June 4, the European Central Bank published its Monetary Policy Statement. The European policymakers voted to keep the Main Refinancing Rate unchanged at 0.00%.

Also, the Bank made various monetary policy decisions. Firstly, the pandemic emergency purchase programme (PEPP) would be increased by €600B to a total €1,350B. Secondly, net purchases under the PEPP would be extended to at least the end of June 2021. Moreover, the maturing principal payments from securities purchased under the PEPP would be reinvested until at least the end of 2022.

Additionally, net purchases under the asset purchase programme (APP) would continue at a monthly pace of €20B, together with the purchases under the additional €120B temporary envelope until the end of the year. Reinvestments under the APP were expected to continue until the Governing Council starts to raise the key ECB interest rates.

Fundamental analysis for EUR/USD: ECB Monetary Policy Statement

The US

On Wednesday, June 10, the Federal Reserve issued the FOMC Statement and the FOMC Economic Projections. As the result, the Federal Funds Rate remained at 0.25%.

According to the official release: "To support the flow of credit to households and businesses, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency residential and commercial mortgage-backed securities at least at the current pace to sustain 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 developments and is prepared to adjust its plans as appropriate."

Fundamental analysis for EUR/USD: FOMC Statement

Japan

On Tuesday, June 16, the Bank of Japan released its Monetary Policy Statement. The Japanese policymakers voted to keep the BOJ Policy Rate at -0.10%.

The Bank revealed that it would actively purchase exchange-traded funds (ETFs) and Japan real estate investment trusts (J-TREITs) for the time being so that their amounts outstanding would increase at annual paces with the upper limit of about ¥12T and about ¥180B, respectively.

Also, the Japanese policymakers announced it would maintain their amounts outstanding at about ¥2T and about ¥3T, respectively. Besides, until the end of March 2021, it would conduct additional purchases with the upper limit of the amounts outstanding of ¥7.5T for each asset.

Initial reaction on the market:

Switzerland

On Thursday, June 18, the Swiss National Bank published the Monetary Policy Assessment, explaining that the SNB Policy Rate will remain unchanged at -0.75%.

According to the official release: "Given the fall in revenues experienced by many companies, ensuring the appropriate supply of bridging loans to the economy is crucial for a rapid recovery. Bridging loans can prevent liquidity shortfalls caused by the crisis from leading to insolvencies. To enable banks to offer such loans quickly and at favourable terms, the SNB has provided them with around CHF 10 billion in liquidity at the SNB policy rate of −0.75% since the launch of the CRF. The banks receive this liquidity with COVID-19 loans guaranteed by the federal government or the cantons serving as collateral."

Initial reaction on the market:

The UK

On Thursday, June 18, the Bank of England issued its Monetary Policy Summary. The majority of the British policymakers voted to keep the Official Bank Rate unchanged at 0.10%.

The Bank announced that it would continue with the existing programme of £200B of the UK government bond and sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves.

Additionally, the Monetary Policy Committee voted to increase the target stock of purchased UK government bonds, financed by the issuance of central bank reserves, by an additional £100B, to take the total stock of asset purchases to £745B.

Fundamental analysis for GBP/USD: BOE Monetary Policy Summary

New Zealand

On Wednesday, June 24, the Reserve Bank of New Zealand released the Rate Statement. According to the Statement, the Official Cash Rate was kept unchanged at 0.25%.

Moreover, according to the official release: "The Monetary Policy Committee agreed to continue with the Large Scale Asset Purchase (LSAP) programme aimed at keeping interest rates low for the foreseeable future. The LSAP quantum remains set at $60 billion. The assets included are New Zealand Government Bonds, Local Government Funding Agency Bonds, and NZ Government Inflation-Indexed Bonds. The Committee is committed to reviewing this quantum at regular intervals, with a focus on achieving its remit."

Initial reaction on the market:


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