US Dollar Index falls to 97.00 on Fed emergency rate cut

• Greenback tumbles across the board, then moves modestly off lows. 
• DXY heads for the lowest close since early January. 

The US dollar dropped across the board following an emergency rate cut to the Fed Funds of 50 basis points. The greenback lost ground against majors but mainly versus emerging market currencies. 

The US central bank had an emergency unscheduled meeting and decided to lower the interest rate. It is the most aggressive cut since the financial crisis. The rate now is 1.00-1.25%. During a press conference, Fed Chair Powell mentioned the economy is strong but the coronavirus will impact on economic activity. As usual, the central bank said is ready to act as appropriate.

“As we think the situation will deteriorate before it turns better, it is difficult for us to see why the Fed should not cut further. By cutting the Fed funds target range, the Federal Reserve has ensured that monetary policy is now neutral instead of tight. Given that the economic situation is likely to become worse before it gets better, we think the Fed needs to cut interest rates down to expansionary territory”, explained Danske Bank analysts. 

The greenback dropped sharply and after Powell’s press conference managed to trim some of its losses. The biggest slide took place against emerging market currencies. The US Dollar Index fell to 97.00, the lowest since January 8 and then rebounded modestly. 

Now the area around 97.40 if the immediate resistance in DXY while on the flip side, 97.00 (daily low) is the support followed by 96.75. 

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