Fed acts again

In another emergency move, and in lieu of its scheduled meeting this Tuesday and Wednesday, the Fed yesterday announced a package of monetary policy measures in a further response to the coronavirus crisis. The reaction in markets has been mixed though with US bond yields lower in Asian trading overnight but equity markets weaker, while the dollar has softened against both the euro, to $1.12, and sterling, to almost $1.24 (leaving the pound hovering around the 90p level against the single currency)

The Fed cut interest rates by 100bps to effectively 0% and will today begin a $700bn round of bond purchases (QE) that will continue over the coming months, while also announcing a number of other measures designed to ensure the continued flow of credit to households and businesses. A number of other central banks have also cut interest rates, including those of Canada and New Zealand

Governments are also stepping up to the plate with measures to mitigate the loss of income suffered by households and businesses on account of Covid-19, something that is likely to continue as the crisis unfolds

European Commission estimates suggest that Euro Area GDP growth this year could be 2.5 percentage points lower, at around -1%, than forecast just a few weeks ago, but warns that a more adverse outcome cannot be excluded

Data due this week include CPI inflation in the Euro Area (Wednesday) and retail sales and industrial production in the US (both Tuesday)