We’re seeing much the same approach to monetary policy around the world. The Reserve Bank of New Zealand (RBNZ), which has been threatening to go “full Switzerland” and start intervening in the FX market along with negative rates, briefed reporters on their possible additional policy measures. They made it clear that they’re preparing to do more. “We have a least regrets approach to thinking how much stimulus to deliver,” RBNZ Chief Economist Yuong Ha said. “We’d rather do too much too soon than too little too late.”

We heard the same line Tuesday from Fed Chair Powell. “At this early stage, I would argue that the risks of policy intervention are still asymmetric. Too little support would lead to a weak recovery…By contrast, the risks of overdoing it seem, for now, to be smaller.”

That statement can help us to understand one of the key lines in the minutes from the September meeting of the Federal Open Market Committee (FOMC), the US central bank’s rate-setting policy board. The minutes said, “many participants noted that their economic outlook assumed additional fiscal support and that if future fiscal support was significantly smaller or arrived significantly later than they expected, the pace of the recovery could be slower than anticipated.

The phrase “significantly later than expected” is important, as it indicates the Fed views stimulus now as qualitatively different than stimulus in three months, when former VP Joe Biden will (we assume) be president. “The pace of economic improvement has moderated since the outsize gains of May and June,” Powell noted. “…a prolonged slowing in the pace of improvement over time could trigger typical recessionary dynamics, as weakness feeds on weakness.” Weak demand triggers bankruptcies and job losses, which causes demand to weaken

By Olga Cotaga

LONDON, Oct 7 (Reuters)The price for benchmark German debt increased on Wednesday after German industrial output unexpectedly slipped in August, suggesting the recovery in Europe’s largest economy from the coronavirus shock could be weaker than hoped.

German 10-year yields fell 1.6 basis points to -0.52% DE10YT=RR after inching to a two-week high on Tuesday.

The day before, the gap between German and U.S. 10-year yields US10DE10=RR widened to its largest since March as U.S. yields rose. They gave back those gains after President Donald Trump on Tuesday abruptly cancelled talks in Washington over coronavirus aid.

For the Italian 10-year government bond, the yield fell to its lowest in more than a year at 0.765% IT10YT=RR as traders expected more monetary policy stimulus from eurozone’s central bank. It last traded down 1.6 bps.

On Friday, the Italian 10-year BTP yield fell to a record low of 0.751%, Tradeweb said.

“People think it’s a little bit of a one-way bet on more stimulus being required from the ECB,” said Lyn Graham-Taylor, fixed income strategist at Rabobank.

On Tuesday, dovish comments from the European Central Bank chief raised expectations for further stimulus.

If the euro strengthened, that would increase the likelihood of ECB easing, Graham-Taylor said.

“If the dollar is stronger, it is probably due to some risk-off factors and this is probably also going to encourage the ECB to have to do more easing,” he added.

Traders await minutes from the Federal Reserve to be released later in the day.

ING analysts said they did not expect the minutes “to be an existential threat to the reflation trade taking hold in dollar rates markets.”

Still, forward Fed Fund rates price in the first full hike only by the middle of 2024, which is slightly more hawkish

By Olga Cotaga

LONDON, Oct 6 (Reuters)The dollar was on the defensive against most currencies on Tuesday as rising optimism that U.S. lawmakers could agree on new stimulus to blunt the economic impact of the coronavirus dampened demand for safer assets.

Risk appetite also improved after U.S. President Donald Trump left hospital and returned to the White House following treatment for COVID-19, a development viewed as reducing political uncertainties in the near term.

The lead taken by Trump’s presidential opponent Joe Biden in electoral polls ahead of next month’s election is also seen as negative for the U.S. currency.

“The increasing possibility of a “blue wave” (Democrat control of the White House and Congress) that would open the door for much-needed fiscal stimulus would be a welcome development for risk assets and could undermine the U.S. dollar,” said Lee Hardman, currency analyst at MUFG.

An index which measures the dollar against a basket of currencies was down slightly at 93.39 =USD. It has fallen 1.2% from a two-month high reached at the end of September, in contrast with U.S. equity markets, which rose.

Euro/dollar was trading up 0.1% at 1.1792 EUR=EBS.

The British pound also rose 0.1%, to $1.2991 GBP=D3, with hopes that a Brexit deal can be reached pushing the currency towards $1.30.

The dollar was 0.1% weaker versus the Japanese yen at 105.65 JPY=EBS.

U.S. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin spoke by phone for about an hour on Monday on coronavirus economic relief and were preparing to talk again on Tuesday, continuing their recent flurry of activity working towards a deal on legislation.

White House Chief of Staff Mark Meadows said there was still potential for an agreement among lawmakers in Washington on more economic relief,

LONDON (Reuters) – Sterling fell against the euro on Monday, although losses were limited as most analysts said they expect Britain and the European Union to soon conclude a Brexit deal.

FILE PHOTO: Queen Elizabeth II is seen with printed medical masks on the Pound banknotes in this illustration taken, March 31, 2020. REUTERS/Dado Ruvic/Illustration

Versus the broadly weaker U.S. dollar, the pound rose.

British Prime Minister Boris Johnson and the head of the EU’s executive, Ursula von der Leyen, agreed in a phone call on Saturday to step up Brexit talks to close “significant gaps” barring a new trade partnership.

Both sides said they have made some progress but not achieved yielded a breakthrough.

The EU must show “more realism” if it wants to bridge differences with Britain on fisheries, a spokesman for Johnson said on Monday.

Johnson does not want the Brexit transition to end without a new trade deal in place, he said on Sunday, but he believes Britain could live with such an outcome.

“While we have frequently cautioned that the more uncertain global backdrop has made it harder to express views on the Brexit process in the currency this year, we are encouraged by the pound’s increasingly idiosyncratic price action as the negotiation deadlines draw near,” Goldman Sachs analysts wrote in a note to clients.

Goldman Sachs saw the pound strengthening to 87 pence against the euro and said “investors with a stronger conviction that risk conditions will improve into year-end should consider expressing the view in cable (sterling/dollar) to also benefit from likely dollar depreciation.”

The derivatives market showed that traders have bought more protection against future pound volatility. The cost for one-month options — which encompass the timing of a possible Brexit deal — in sterling/dollar are around their highest level in the

traders new york stock exchange


  • Recent financial market returns point to investors shifting cash to safe havens and growing more concerned about a slowing economic recovery, Jason Draho, head of asset allocation in the Americas for UBS, said Monday.
  • After the September tech-stock correction ended, investors lifted long-dated Treasurys, the US dollar, and large-cap growth stocks. Cyclical assets including gold, small-caps, and high-yield bonds sank.
  • The shifts “are consistent with investors seeking (relatively) safe assets as concerns rise about moderating growth and inflation disappointment,” Draho said.
  • Market participants can expect high growth uncertainty to “delay a sustained rotation towards more economically-sensitive assets,” Draho added.
  • Visit the Business Insider homepage for more stories.

September brought heightened stock market volatility and a mass rotation out of tech giants, but the most recent week of returns signals a new concern gripping investors.

Returns across the stock, bond, currency, and commodity markets point to increasing risks to economic growth and inflation, Jason Draho, head of asset allocation in the Americas at UBS, said in a Monday note. Last week saw investors pivot back to long-dated Treasurys, the US dollar, and large-cap growth stocks.

More cyclical assets such as small-cap stocks, emerging market equities, gold, and high-yield bonds all tumbled over the period. Inflation expectations fell and 10-year real rates climbed slightly, reflecting a more bearish outlook toward price growth.

The returns data can easily drive “spurious conclusions,” but the shifts “are consistent with investors seeking (relatively) safe assets as concerns rise about moderating growth and inflation disappointment,” Draho wrote.

Read more: BANK OF AMERICA: Buy these 11 stocks to profit as e-commerce and robotics revolutionize their businesses and keep them growing faster than peers

Those investors aren’t without cause for concern. While some facets of the economy have roared back to their