Intraday Market Thoughts

Fed, RBNZ Manoeuvre Around Zero

by Ashraf Laidi
May 13, 2020 15:57

Fed Chair Powell manoeuvred his way around the negative rates verbal landmine in today's webinar at the Peterson Institute, stating the Fed isn't looking at negative rates, preferring to focus on the importance of fiscal aid (more below). The Kiwi is the biggest loser of the day after the Reserve Bank of New Zealand expanded its QE and said “a negative OCR will become an option in future” (more below). That's good news for our Premium NZD trades, opened earlier this week. Here's open access to this week's Premium Video.

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Powell: "With interest rates at ZLB and no desire to use negative interest rates, the Fed will rely heavily on existing tools such as forward guidance and balance sheet policies.” Basically, Powell is seeking new ways to say negative rates are not an option but would not rule them out. Even hawkish Cleveland Fed's Mester is personalizing the issue, saying "I still am not thinking that would be a go-to tool for me".

Meanwhile, the RBNZ increased bond purchases to a NZ$ 60 billion, indicating that discussions with financial institutions about preparing for a negative OCR are ongoing." For currencies, the implications of one central bank going to zero may not have lasting significant implications if most key central banks will end up at the same destination.

USDX fluctuations are at their tightest since early February, keeping key USD pairs relatively directionless. GBPUSD, however, merits a close look as it breaks below 1.2250s. More importantly, EURUSD is undergoing some key RSI patterns, seen only in three past occasions in its 21-year life. 

We said in yesterday's IMT “we're watching … the NASDAQ's attempt to fill and break the Feb 24 gap.. the semiconductors index 1800 resistance ”, hours before indices began their broad selloff later in the session. There was no trade issued to Premium subscribers, but a suggested trade was sent to the WhatsApp Broadcast Group of VIP Premium subscribers.


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