Funding Operations Extended

Ahead of the July FOMC meeting later today, the Federal Reserve announced yesterday that it will extend the duration of a number of its lending facilities through to the end of the year in a bid to continue supporting the economy.  The extensions will apply to several of the bank’s lending operations which were due to expire in September,

In a statement released yesterday announcing the move, the Fed said: “The three-month extension will facilitate planning by potential facility participants and provide certainty that the facilities will continue to be available to help the economy recover,”

In terms of the facilities the extensions will apply to, the Fed highlighted the following operations: Primary Dealer Credit Facility, Money Market Mutual Fund Liquidity Facility, Primary Market Corporate Credit Facility, Secondary Market Corporate Credit Facility, Term Asset-Backed Securities Loan Facility, Paycheck Protection Program Liquidity Facility, and Main Street Lending Program.

This announcement from the Fed comes as enhanced unemployment benefits for millions of out-of-work Americans are due to expire this week. Congress is still deep in negotiations aimed at establishing a new relief package to help support those who remain out of work, expected to include a further trance of direct support payments to individuals as well as further loans to small businesses.

July FOMC Meeting Later Today

The market is now waiting on the July FOMC later today. While no further adjustments are expected at this stage, the Fed’s assessment and guidance will be key. The recent resurgence in COVID-19 cases and deaths in the US has raised a great deal of uncertainty. Local lockdowns have had to be reintroduced in places in a bid to battle the uptick in infections and there are concerns about the extent to which this will damage the economy. 11 US states have reversed reopening measures to go back into lockdown while a further 11 states have postponed reopening measures to remain in lockdown. The nature of lockdown varies from state to state in terms of which sectors of the economy have reopened. However, with the daily US death toll having moved back above 1000 there are concerns about the near future and the potential for stricter measures to be implemented. In this scenario, the impact on the economy would be particularly dire and the need for further Fed stimulus would be greatly amplified.

Technical Views

USDJPY (Bearish below 106)

From a technical viewpoint. USDJPY continues to trade lower within the bearish channel which has framed the breakdown from year to date highs. Price has now broken below key support at the 106 level and is fast approaching the 104.63 2019 lows. If price breaks below here, the next level to watch will be the 103.09 level, with the bear channel low coming in just above.

Fed Announces 3mth Extension to Lending Programs Ahead of FOMC

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