The dollar is recouping some losses from overnight trading
The main story from overnight trading was that the Fed performed an emergency 50 bps rate cut to cope with the economic fallout from the coronavirus outbreak.
The greenback weakened in reaction with stocks rising initially before turning tail and posted sharp losses. Meanwhile, Treasury yields fell further with 10-year yields now under 1% (!) - compounding the dollar weakness amid the erosion in yields.
Trading today is much calmer as the market turns their attention towards the response of other major central banks. The dollar is recovering some ground against the euro and yen to start the day but is keeping weaker against the commodity currencies for now.
The good news for the aussie is that there has been a shift in the near-term bias as AUD/USD rises back above both its key hourly moving averages after the events yesterday.
However, gains may prove to be fleeting if the economic fallout from the virus deepens and with the RBA likely to exhaust all its policy space with another rate cut next month.
In a race to zero rates among central banks around the world, gold stands to benefit and the sharp jump yesterday could be a taste of what is to come next with the commodity.
Watch out for the year's high near $1,689 as a firm break there could set off another strong leg higher in gold as the current situation continues to develop.
