Sat, Dec 05, 2020 @ 00:08 GMT
Home Contributors Fundamental Analysis BOE Gov Plays Down Chance Of Negative Rates Despite Resurgence Of Virus

BOE Gov Plays Down Chance Of Negative Rates Despite Resurgence Of Virus


  • UK poised to implement further restrictions to combat the spread of coronavirus but PM Johnson expected to stop short of announcing a full national lockdown like that imposed in March
  • BOE Gov Bailey plays down chance of negative rates despite resurgence of virus
  • Riksbank keeps policy steady and maintains its forward guidance of rate at zero for years to come


  • China leaders said to be debating whether to release a blacklist of US companies; some officials urge waiting until after the US elections
  • RBA Deputy Gov Debelle stated on various options the central had. Noted that options included to buy bonds further out on curve to lower rates at longer maturities or lower cash rate but not negative, or go into negative rates (does not signal possible timing for next move); Not clear if intervention would be effective as the AUD is in line with Fundamentals


  • Total global cases 31.3M, total deaths: 963.7K
  • Hong Kong Chief Exec Lam: Hong Kong will extend all social distancing rules by 1 additional week until Oct 1st


  • UK making preparations for 2nd lockdown.Govt to raise coronavirus alert status to its second-highest level (from Level 3 to Level 4). UK PM Johnson to order pubs to close at 10pm local time from Thursday (Sept 24th) as part of new coronavirus restrictions. To also hit restaurants and other hospitality venues
  • London Mayor Khan Mayor agreed with local council leaders and public health experts that new COVID-19 restrictions to be put to central government in an attempt to stem the outbreak in the capital.
  • German Gov Spokesperson stated that Chancellor Merkel and EU’s Von Der Leyen agreed that a quick agreement with European Parliament on EU budget, recovery plan was needed to guarantee that EU programs could start as planned in January 2021


  • Fed Chair Powell: Fed to use tools for as long as it takes to ensure strong recovery; economic activity had picked up. Path ahead is highly uncertain and hinges on virus and polices
  • Fed’s Bullard (non-voter): Supported FOMC decision last week; Fed new approach to lifting inflation was likely to work; had already delivered enough fiscal aid
  • Congressional Budget Office (CBO) updated long term budget and saw GDP growth averaging 1.6% over next 30 years compared to its view back in 2019 of 1.9% growth average
  • President Trump stated that China has been living up to the Phase 1 trade deal. Noted that officials would not adjust the exchange rate with China after what he described as repeated currency manipulation by China



  • Indices [Stoxx600 +0.51% at 358.64, FTSE 0.00% at 5,804.45, DAX +0.78% at 12,637.25, CAC-40 +0.07% at 4,795.28, IBEX-35 -0.35% at 6,669.00, FTSE MIB +0.56% at 18,898.50, SMI +0.52% at 10,379.17, S&P 500 Futures -0.17%]
  • Market Focal Points/Key Themes: European indices open higher across the board but later turned to mixed as the session progressed; better performing sectors include technology and Industrials; financials and consumer discretionary sectors among underperformers; UK hospitality impacted following anti-covid orders announced yesterday; reportedly UK to issue further lockdown measures later in the day; earnings expected in the upcoming US session include Nike and AutoZone


  • Consumer discretionary: TUI [TUI.UK] +1.5% (trading update; capacity and jobs cut), Kingfisher [KGF.UK] +7% (earnings), Whitbread [WTB.UK] -3% (trading update; job cuts)
  • Financials: Close Brothers [CBG.UK] +3% (earnings)
  • Industrials: Hochtief [HOT.DE] +1% (contract)
  • Telecom: Prosieben [PSM.DE] +9% (reports on stake)


  • Sweden Central Bank (Riksbank) policy statement reiterated its forward guidance that the Repo Rate to remain at current level in coming years and that it could be cut if necessary and deemed effective. Domestic economy had begun to recover but was fraught with uncertainty. Expected to take time before inflation was more permanently close to the 2% target
  • Sweden Central Bank (Riksbank) Gov Ingves post rate decision press conference noted that lending and QE were the most efficient ways to keep rates low
  • BOE Gov Bailey: Reiterated view that domestic recovery had been quite rapid and substantial with Q3 recovery a bit ahead of expectations. Recovery was uneven below the surface and seeing an unfortunate return of the virus which reinforced downside risks. Reiterated stance that prepared to change policy if needed; looking very hard at scope to cut rates further – even into negative territory
  • UK Gov official Gove confirmed govt to announce new coronavirus restrictions later today (Tues, Sept 22nd); PM Johnson to provide details. He stressed that UK needed to act to contain the spread of virus. Hospitality venues would remain open and working from home to see a shift in emphasis. He noted that people should work from home if possible
  • UK Trade Sec Truss: stated that ended productive talks regarding UK-US trade deal during the 4th round of talks. exchanged initial tariff offers and held market access talks
  • Poland Central Bank’s Zubelewicz stated that would back motions for gradual rate hikes but did not expect tightening proposals in the “near future”
  • Germany IFO Institute updated economic outlook which raised its 2020 GDP outlook from -6.7% to -5.2% while cutting 2021 GDP growth forecast from 6.4% to 5.1%
  • Germany HDE Retail Association: Raises 2020 nominal sales outlook from -4.0% to +1.5%. Cited online sales and the government’s stimulus measures (such as a temporary VAT cut and cash handouts) as helping to improve outlook
  • Russia said to be planning to register a 2nd coronavirus vaccine by Oct 15th

Currencies/Fixed Income

  • USD continued its firm tone against most major pairs with the greenback aided by a surge of virus cases and new lockdown measures in Europe
  • Focus was on the GBP currency which initially weaken in the session on reports that UK would implement news measures to contain the spread of the coronavirus. – Cable tested below 1.2715 after BOE Gov Bailey noted that negative rates remained a part of the toolbox. However, a sharp reversal occurred after BOE Gov hinted that MPC was not close to negative interest rates despite the resurgence of the coronavirus reinforcing downside risks to the UK economy
  • SEK currency (Krona) slightly firmer as Riksbank kept policy steady and reiterated stance of option of a rate cut on the table

Economic Data

  • (NL) Netherlands July Consumer Spending Y/Y: -6.2 v -7.0% prior
  • (NL) Netherlands Sept Consumer Confidence Index: -28 v -29 prior
  • (FI) Finland Aug Unemployment Rate: 7.7% v 7.7% prior
  • (DK) Denmark Sept Consumer Confidence Indicator: -7.4 v -5.5 prior
  • (ZA) South Africa July Leading Indicator: 99.9 v 95.0e
  • (TR) Turkey Sept Consumer Confidence: 61.8 v 59.6 prior
  • (SE) Sweden Central Bank (Riksbank) left Repo Rate unchanged at 0.00%; as expected
  • (TW) Taiwan Aug Unemployment Rate: 3.8% v 3.9%e
  • (HK) Hong Kong Q2 Current Account Balance: +60.5$B v $8.9B prior (revised from -$9.0B); Overall Balance of Trade (BoP): $B v $25.8B prior
  • (IS) Iceland Aug Wage Index M/M: +0.2% v -0.1% prior; Y/Y: 6.4% v 6.3% prior

Fixed Income Issuance

  • (UK) DMO opened book to sell GBP-denominated 0.5% Oct 2061 Gilt; guidance seen -0.5 to 2060 Gilts
  • (ID) Indonesia sold total IDR22T vs. IDR20T target in bills and bonds

Looking Ahead

  • (IL) Israel Sept 12-month CPI Forecast: No est v 0.4% prior
  • (NG) Nigeria Central Bank Interest Rate Decision: Expected to leave Interest Rates unchanged at 12.50%
  • 05:30 (DE) Germany to sell €5.0B in 0% Sept 2022 Schatz
  • 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills
  • 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
  • 05:30 (ZA) South Africa to sell combined ZAR6.6B in 2035, 2040 and 2048 bonds
  • 06:00 (UK) Sept CBI Industrial Trends Total Orders: -40e v -44 prior; Selling Prices: -4e v -5 prior
  • 06:00 (IE) Ireland Aug PPI M/M: No est v -0.9% prior; Y/Y: No est v -8.4% prior
  • 06:30 (EU) ESM to sell 6-month bills; Avg Yield: % v -0.5640% prior; Bid-to-cover: x v 4.70x prior
  • 06:45 (US) Daily Libor Fixing
  • 07:00 (BR) Brazil Central Bank (BCB) Sept COPOM Minutes
  • 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed)
  • 07:00 (TR) Turkey to sell 10.6% 2026 Bonds
  • 07:45 (US) Goldman Economist Chain Store Sales
  • 08:00 (HU) Hungary Central Bank (MNB) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.60%; Expected to leave Overnight Deposit Rate unchanged at -0.05%
  • 08:00 (PL) Poland Aug M3 Money Supply M/M: +0.5%e v -0.3% prior; Y/Y: 16.4%e v 16.8% prior
  • 08:00 (UK) Daily Baltic Dry Bulk Index
  • 08:00 (IT) ECB’s Panetta
  • (NG) Nigeria Central Bank Interest Rate Decision: Expected to leave Interest Rates unchanged at 12.50%
  • 08:55 (US) Weekly Redbook LFL Sales data
  • 09:00 (EU) Weekly ECB Forex Reserves
  • 09:30 (HU) Hungary Central Bank Gov Matolcsy post rate decision statement
  • 10:00 (US) Aug Existing Home Sale: 6.01Me v 5.86M prior
  • 10:00 (US) Sept Richmond Fed Manufacturing Index: 12e v 18 prior
  • 10:00 (EU) Euro Zone Sept Advance Consumer Confidence: -15.0e v -14.7 prior
  • 10:00 (MX) Mexico Weekly International Reserves data
  • 15:00 (AR) Argentina Q2 GDP Q/Q: No est v -4.8% prior; Y/Y: No est v -5.4% prior
  • (MX) Citibanamex Survey of Economists
  • 16:30 (US) Weekly API Oil Inventories
  • 19:00 (AU) Australia Sept Preliminary PMI Manufacturing: No est v 53.6 prior; PMI Services: No est v 49.0 prior; PMI Composite: No est v 49.4 prior;
  • 20:30 (JP) Japan Sept Preliminary PMI Manufacturing: No est v 47.2 prior; PMI Services: No est v 45.0 prior; PMII Composite: No est v 45.2 prior
  • 21:10 (JP) BOJ Outright Bond Purchase Operation for 1~3 years; 3~5 year and 5~10 years maturity
  • 22:00 (NZ) New Zealand Central Bank (RBNZ) Interest Rate Decision: expected to leave Official Cash Rate (OCR) unchanged at 0.25% (**Note: Staff Forecasts)
  • 23:30 (TH) Thailand Aug Customs Trade Balance: $3.1Be v $3.3B prior; Exports Y/Y: -13.0%e v -11.4% prior; Imports Y/Y: -20.0%e v -26.4% prior
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