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As major parts of Victoria go back into lockdown and second wave fears built in the likes of Southern USA, Brazil and India, FX once again looks to be concentrating on rhetoric and action rather than health risks that are clearly present.

The Mario Draghi coined ‘Whatever it takes’ approach appears to be once again taking centre stage as policymakers look to steer their economies through the second wave risk with evermore support.

This point was clearest from members of the Federal Open Market Committee’s (FOMC) statements on Wednesday:

·         Atlanta Fed president Bostic repeated concerns over the sustainability of the US recovery due to the increased spread of COVID-19, referring to increased business concerns and consumer nervousness and stated the FOMC should look to continue its current programs of balance sheet expansion.

·         Cleveland Fed president Mester expected structural changes to the economy resulting from COVID-19. She went on to state that without the proper flow of credit through functioning financial markets, a credit crunch would occur. And thus, she praised the Fed actions to allow markets to continue to work and provide credit during this time.

·         Then there was Vice Chair Clarida and his comments that sent the USD in to a frenzy, and shows that the Fed is ready for anything by stating: ‘there is no limit on how much mortgage backed securities and treasuries the fed can buy… there's more we could do in terms of our balance sheet program.’

A clear signal that the old adage of ‘don’t fight the Fed’ is very much alive and well.

It’s not just the US central bank looking to stimulate, Washington is also in the process of building a new stimulus program. According to Vice President Mike Pence’s Chief of Staff Marc Short, the administration is pushing for a new program of up to US$1 trillion to be rolled out by the first week of August.

This rumoured economic support pushed the USD higher against most pairs. With EUR/USD falling to low $1.12 USD/JPY rose to ¥107.5. The exception was Sterling, which rose to $1.26 as the UK continues to tentatively come out of its lockdowns.

AUD/USD slipped as far as $0.6922 on the news from Victoria before steadying around 0.6950 but it’s clear $0.70 is becoming a bridge too far for the pair to cross and the bears are defending this position quite well.