After a disappointing G7 statement, the Fed surprised many traders in delivering an intra-meeting 50 basis-point cut. Some believed the Fed had the luxury of waiting till the March 18th meeting before pulling the trigger. The Fed’s actions combined with the G7 statement indicate we will see other central banks deliver significant rate cuts as local governments work on their respective fiscal responses.
Emergency rate cuts do not always have a lasting impact, and this one might get faded until we see a fiscal response or optimism grow on the virus front.
Oil
Oil initially spiked higher following the Fed announcement but will likely remain stubborn until we see the outcome of the OPEC meetings later this week.
Gold
Gold will continue to climb higher as global policy-makers have a domino effect of easing. A wave of global monetary easing is upon financial markets and gold will be one of the biggest beneficiaries. Gold is back above the $1,600-an-ounce level and could be poised for another run towards the $1,700 level once governments announce the details to the major fiscal stimulus response. The Treasury trade is about to be exhausted and gold holdings will become a key component for many portfolios.