Fed Chair Powell Pushes Back Against Negative Rates

Fed Chair Powell Pushes Back Against Negative Rates

Overall new cases of the virus continue to climb as well, as states end lockdowns and reopen local economies without the widespread, uniform testing and contact tracing policies that helped stamp out initial outbreaks in South Korea and Germany. Bonds and the dollar held ground won overnight.

MSCI's gauge of stocks across the globe .MIWD00000PUS shed 1.00% following broad declines in Europe and Asia.

"Sharp losses for United States indices yesterday set the stage for Europe's weakness.as investors take heed from Powell's comments last night about the recession and its potential severity", said IG analyst Chris Beauchamp.

"It is important to put this on the table: this virus may become just another endemic virus in our communities, and this virus may never go away", World Health Organization emergencies expert Mike Ryan told an online briefing on Wednesday.

The Fed's top official became the latest in a parade of policymakers to brush off the notion that they might push rates into negative territory after futures tied to Fed interest rate policy expectations recently began pricing a small chance of sub-zero US rates within the next year. The yield on the benchmark 10-year Treasury note fell to 0.612% intraday, according to Tradeweb, from 0.648% at Wednesday's close.

A surprise drawdown of USA inventories helped oil prices make meager gains.

Against a basket of its rivals =USD , the dollar was up 0.20% at 100.37, hitting a three-week high of 100.56 early in the session. The kiwi fell as the RBNZ said that a negative cash rate "will become an option in future" and that "discussions with financial institutions about preparing for a negative OCR are ongoing".

Equity markets have wavered since April's rally as investors and authorities try to weigh the risks of re-starting economies quickly against the financial ruin that lockdowns have wrought, while worrying about a flare-up infections.

The dollar-liquidity squeeze could be much worse if rates fall below 0%, Michael Cloherty, UBS head of US rates strategy said in a note.

U.S. President Donald Trump said on Thursday that he would be open to negotiating another possible stimulus bill.

In the week ahead, the U.S. focus will be on Congressional testimony by Fed Chair Powell while in Australia, the data highlight is April retail sales.

Safe-haven assets such as USA government bonds also inched higher.

"A second pandemic wave is unfortunately not a tail risk, so the full extent of the economic damage may be underestimated", he said, recommending a long position in euro/kiwi EURNZD= which has gained almost 9% this year as market volatility has increased.

USA crude CLc1 recently rose 3.56% to $26.19 per barrel and Brent LCOc1 was at $30.33, up 3.91% on the day.

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