US Federal Reserve Cuts Rates To Zero Alongside Co-Ordinated Move By Central Banks To Ease Money Supply

Xe Corporate

March 16, 2020 3 min read

The US central bank unexpectedly cut interest rates to 0% - 0.25% last night and introduced $700bn of additional monetary stimulus in an effort to further support the US economy during the Coronavirus pandemic.

In a co-ordinated move designed to ensure global dollar liquidity the central banks of the US, Canada, England, Japan, Europe and Switzerland have also agreed to lower US dollar swap rates between themselves and in turn increase the availability of dollars to their domestic banks at a reduced rate and extended maturity.

The goal being to ease the pressure on global funding markets and help mitigate the strain of credit supply to households and businesses.

As central banks globally take unprecedented steps to support their economies during the pandemic the Bank of Japan have this morning also announced further stimulus and the New Zealand Central bank has cut interest rates from 1% to 0.25%.

For currencies specifically we are continuing to see risk off flow as investors head to the traditional safe havens of the Swiss franc and yen. The euro is also continuing to strengthen as equity/ investment positions unwind back into the single currency as global interest rates equalise. Under pressure are commodity currencies such as CAD, NZD, AUD and ZAR.

Subsequently in the last week sterling has seen a two year high against the Canadian dollar and a four year high against the currencies of Australia and New Zealand.

At the time of writing the pound is at a seventh month low against the euro (1.1042) and a five-month low against the dollar (1.2340).

The figures are based on the live mid-market rate, correct as of 08:00 GMT on 16/03/2020, and are provided for indicative purposes only. Live mid-market rates are not available to consumers and are for informational purposes only. The rates we quote for money transfer can be selected via the page on our website ‘Live Money Transfer rates’.

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