Can Powell, the Fed Chairman, Deny Negative Interest Rates!? “Highlights on May 13 and Event Schedule”

President Trump has been pressuring the Fed to introduce negative interest rates on Twitter.

Until now, he has continued to apply pressure during rate cuts, implemented tariffs, and somehow forced the Fed to decide on rate cuts.

This time, he is applying pressure to introduce negative interest rates.

People are curious whether Trump will again yield to the pressure this time as well.

Additionally, it is of interest what actions Trump would take to induce a negative rate.

◎ Today's Points of Focus

1) Powell Fed Chairman Speech

As indicated by Trump’s tweets yesterday pressuring negative rate implementation, there were rumors of negative rate introduction in the market as well.

Therefore, it is believed Powell would deliver a speech.

Today's Powell speech is expected to deny negative rates.

Thus, if the denial of negative rates is as anticipated, the market reaction is expected to be limited.

However, if there are remarks hinting at negative rates or if negative rates are not denied, the dollar could weaken.

Watch the Powell speech and the direct reaction of the U.S. 2-year yield to policy rate expectations.

2) UK GDP

Today’s release is the UK GDP for Q1 (preliminary estimate).

Initially, the UK planned not to lockdown, among other things.

Considering that the UK’s lockdown response lagged behind Europe, especially Spain and Italy, if the UK’s GDP preliminary figures are worse than expected, Europe might interpret it as indicating broader weakness.

Therefore, not only the UK’s economic situation but also the forthcoming European GDP figures will be informative, so this is worth monitoring.

3) RBNZ Board Meeting

New Zealand implemented strict border controls and movement restrictions to curb the spread, thus claiming infection numbers were suppressed.

However, that suggests the economy has also stagnated.

Today's statement will be watched to see how the outlook for the economy is viewed going forward.

Also, attention is on whether tools remain for future monetary policy, whether additional easing is possible, and whether negative rates are being considered.

Forecasts appear to be unchanged.

4) Risk Off

With ongoing criticism between the US and China, and China maneuvering to assert control in the Senkaku Islands, Taiwan, and the Spratly Islands amid COVID-19, watch for potential US-China tensions.

China is clashing with Australia over coronavirus responsibility and is being questioned by Europe and the UK.

In Europe, tensions exist between Germany and other EU member states.

Turkey faces volatility over the lira; emerging markets broadly experience currency weakness.

Additionally, company earnings affected by the pandemic may keep stock prices capped and lead to declines.

Oil prices remain unsettled due to production-cut expectations.

There are multiple risk factors to be mindful of.

◎ Today's Economic Event Schedule

Wednesday, May 13

09:30 AUD Westpac Consumer Confidence Index

11:00 NZDRBNZ Interest Rate Decision and Statement

12:00 NZDRBNZ Governor press conference

15:00 GBPUK GDP (Q1) (Preliminary)

16:00 TRY Current Account

20:00 EUR Lane ECB Executive Board Member Speaking

22:00 USDPowell Fed Chair Speech

23:30 USDCrude Oil Inventories

24:00 EURDegnitos ECB Vice President Speaking

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