Fed shock and awe strategy has limited........>

FOREX: Fed shock and awe strategy has limited shelf life

- For the first time since the depths of the financial crisis the Fed chose to

cut rates inter-meeting. Powell and the board cited risks to the outlook from

the spread of Coronavirus as the thinking behind the move and cut 50bps. Given

how aggressively rates, currency and equity markets have been pricing in

near-term action, the half-life of the support for markets was brief and the

upside in equities lasted all of ten minutes. Subsequently, equity futures

turned back lower and markets reversed much of the USD weakness to keep most

pairs on a relatively even keel. Interestingly, markets are still eyeing further

action from the Fed, with another March 25bps cut still fully priced.

- CAD weakened sharply and was the poorest performer in G10 as traders suspect

the Fed's actions Tuesday will force the BoC to match at their Wednesday

meeting. AUD, on the other hand, is the strongest as the RBA response was seen

as lacking, despite their 25bps easing.

- The BoC decision, Australian GDP, China Caixin PMI, US ADP employment and ISM

non-manufacturing data take focus Wednesday. BoE's Bailey & Broadbent speak.