On Tuesday we saw central banks start taking measures to stimulate the economy. The first bank was the Australian bank, reducing the refinancing rate by 25 basis points, to 0.5%. This was followed by the US Federal Reserve, which also reduced the interest rate by 25 basis points to 1%. The heads of G7 financial institutions promised to coordinate actions and prevent the development of problems in the global economy.
Chart of the day – Gold
The situation at the ECB is a little bit more complicated. The limited threshold for the reduction of the refinancing rate does not allow for a strong turn in this direction. The head of the French central bank said that the ECB policy had already been adaptive and contributed to the stabilization of the euro area economy. If necessary, the ECB is ready to take liquidity support measures for individual banks and companies.
These actions and statements certainly do not bring a momentary effect, but will be working out only in the medium term. Therefore on Tuesday the world indices show mixed dynamics. The DAX index closed on 1% plus. The S&P500 index is down by about 2%, the DOW index is down again and is also losing a little more than 2%.
Against the backdrop of lower rates in the U.S., the dollar is losing its position. The Euro is growing, but slows down significantly. If you look technically, the Euro is in the overbought zone for a certain period of time, and it is likely that we can adjust down to 1.1040. In the near future, we will be watching the ECB, which might make some adjustments to the monetary policy, which might seriously affect the current exchange rate.
On Tuesday, gold completely recovered its position and very seriously targeted the level of $1700 per ounce. The easing of monetary policy is the best news for gold holders. With a lower interest rate, the cost of gold ownership is declining, which increases the demand for the precious metal. If the gold continues the trend, we will probably see another good momentum that will go to the level of $1670, and further $1700 per ounce.
What awaits us today?
01.30 Australian GDP
10.30 UK PMI Composite Index for February
14.15 February Non-farm payrolls in the USA
16.00 Canadian interest rate decision
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