The United States President Donald Trump called for the introduction of negative interest rates. After that, investors waited for a speech from Federal Reserve Chairman Jerome Powell. Thus, on Wednesday, the dollar steadied below a three-week high.
Some United States policymakers have spoken against negative interest rates. Nevertheless, two-year Untied States Treasury yields fell last week to a record low of 0.105%. Moreover, 2021 Federal Reserve fund futures contracts are skirting negative territory.
On Tuesday, Trump called for his country to accept the gift of negative rates. It is because data showed that United States consumer prices dropped 0.8% in April. It is the most significant decline since December 2008 when the economy was in recession’s throes, thus fueling the debate concerning the policy response.
David Madden is a CMC Markets analyst. He wrote that the central banker might use the opportunity for nipping the negative rates chatter in the bud. Thus, many investors expect a rebound in the dollar should Powell decide to do so.
Dollar and Other News
The dollar index against the basket of rivals was flat at 100.02. It hovered below the three-week high of 100.44 hits on Tuesday. From an early March low of 94.63, the United States dollar has gained more than 5%
Antje Praefcke s Commerzbank strategist. She said that if push comes to shove, the Federal Reserve will, of course, consider negative interest rates too. Nevertheless, they are most likely to be on the bottom of the Federal Reserve’s list of possible options. It is in case it comes to support the economy or financial system further.
In March, eurozone industrial production suffered its steepest monthly fall on record. It was because coronavirus containment measures severely hit activity. Thus, against the United States dollar, the euro edged down 0.1% to $1.0840.
Moreover, amid the market turmoil, the United States dollar benefited from safe havens flows.