HSBC on negative interest rates - may be ignored by forex markets

Author: Eamonn Sheridan | Category: News

HSBC research note on the impact of negative rates, saying the effect on economies is complex and the result therefore for FX is unclear.

Negative interest rates contribute to a breakdown in the relationship between rates and FX
  • don't have a notably direct negative impact on FX
  • may even mean that FX markets start to pay even less attention to rates, rather than worrying about them more
  • currencies weaken iwhen traders anticpate negative rates. but the impact lessens soon after they take effect 
  • little evidence of negative policy rates causing deposit outflows
  • negative rates are not new
  • market is focused on relative interest rate differentials 

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