Risk appetite returns as Fed goes limitless…but for how long?   

24th March, 2020  :As monetary policy bazookas prove ineffective against the coronavirus-induced market chaos, central banks are taking unprecedented steps in defending their respective economies against the pandemic.

Over the last 24 hours, the Federal Reserve dropped an atomic monetary bomb by announcing an open ended unlimited quantitative easing program in an effort to promote stability across financial markets.  Although the initial reaction was somewhat mixed with shares on Wall Street closing in the red overnight, investors seem to be taking heart from the Fed’s limitless pledge, as Asian stocks roar back to life this morning and US futures jump. However, this positive market mood is unlikely to last given how the Senate once again failed to move ahead with a $2 trillion US coronavirus stimulus package at the start of the week.

If the global economy is a tin bucket filled with water, the coronavirus outbreak has drilled multiple holes into it and monetary policy bazookas are unable to stop the water from leaking away. While fiscal policies could plug some of the holes, the solution may have to be a new bucket which in this instance is a cure to the coronavirus.

Source : Lukman Otunuga, Senior Research Analyst at FXTM

Reporting for EasyKobo on Tuesday , 24 March 2020 in Lagos, Nigeria

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