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Federal Reserve Chair Powell will speak this week – to push back on negative interest rates

  
  Analysis
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Fed’s Powell is to speak at a Peterson Institute for International Economics event (webinar)

  • He is billed to discuss his economic outlook, but is also to expected to address monetary policy (more on this below)
  • text with a Q&A to follow
  • Wednesday 13 May at 1300GMT
In brief – while there has been intense speculation about the Fed moving to negative interest rates, it seems likely Powell will push back on this. Other Fed officials who have spoken recently have all expressed caution on moving to negative rates but it may be time to wheel out Powell to more effectively quash the chatter.
Some of the recent remarks on likely negative rates have come from big hitters in the industry, while market pricing has also indicated sub-zero rates.
  • Scott Minerd, global chief investment officer of Guggenheim Partners said on Friday he expects rates below zero ‘soon’ – he cited declining Treasury yields
  • Other market movements are also reflecting expectations –  eg. falling LIBOR,
  • Jeffrey Gundlach, co-founder of DoubleLine Capital tweeted last week on mounting pressure on fed funds to go negative and said “fatal” consequences may have brought the expectations to the fore (more here: Jeffrey Gundlach says pressure building on Fed funds to go negative)
Fed's Powell is to speak at a Peterson Institute for International Economics event (webinar) 

Hedge fund CEO Jeffrey Gundlach says next big move for the US dollar is down

  
Analysis, Forex
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Gundlach is the founder of DoubleLine Capital, some remarks (via Twitter):

  • “One of the reasons I think the dollar has stayed strong this year has been the yield starvation that exists in the world.”
  • “Investors have been forced out of need and yield starvation to buy U.S. assets naked; meaning, they’re taking the dollar risk. And in spite of all that money coming into the U.S. dollar and not being hedged, the dollar has barely budged this year. “
  • “To me, that reinforces my forecast that the dollar’s next big move will be to the downside.”
And:
  • “Dollar cycles, as I’ve said repeatedly in the past, tend to go on for multiple years and be quite persistent. And they are highly correlated with the fed funds rate, particularly the fed funds rate versus what is going on in other central banks.” 
us dollar fed funds chart
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