US stocks were trying to rebound after a massive tidal wave of stimulus from the Fed got derailed after US lawmakers failed again in pushing through a massive fiscal stimulus package. Monday had the potential to have of a one-two punch of stimulus from both the Fed and Congress. The Fed delivered, but US lawmakers are showing they are on opposite ends of several key issues.
The Fed’s action gave the dollar’s rally a flat tire (against the euro). The Fed got an A+ today with their decision to buy an unlimited amount of bonds to keep borrowing costs low and the creation of new programs to ensure credit flows to corporations and governments. The Fed will help employers and households and telegraphed that a small-and-medium sized business lending program will be created.
Congress continues to reiterate they are close to getting a deal done and expectations are still high it will happen this week. Senate Democrats want to ensure the bailout of larger companies goes to the benefits of workers, solar energy tax credits and new emission standards for airlines. Republicans are still 11 votes shy of getting this done so it is likely they will meet somewhere in the middle.
Oil prices are stabilizing on a combination of two things: The vicious crash in oil prices is seeing some exhaustion as the overall heightened market volatility is showing signs of easing. The other reason is that the action by the Fed was a game changer with the outlook for the US dollar and commodity prices across the board will see some relief.
WTI crude is still poised to break the $20 level, but for now we could see price action muster up a rally back towards the $27.50 region.
Gold is having its best day in over a decade on stimulus bets and easing market volatility. Despite the Senate’s failed second attempt at advancing the coronavirus stimulus bill, gold is rising as Wall Street is confident that at the end of the week a boatload of fiscal and monetary stimulus will do its part in calming some of the extreme market volatility. Now that the Fed has gone all-in again thanks to unlimited QE, the dollar is finally weakening and that will be the icing on the cake for the gold bulls to jump back in.
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