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The research analysts at HSBC bank are out with their take on the much-debated negative interests and its impact on the economies and the fx markets.

Key quotes

“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 when traders anticipate 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.”