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Federal Reserve’s  Kashkari has said that the single best indicator of recessions is the inverted yield curve.

More from Kashkari:

  • The yield curve inverts because investors are nervous about future growth.
  • The inverted yield curve is a concerning sign; I take the signal seriously.
  • The US consumer is doing well, but businesses are reducing investments.

FX implications:  

The markets are weighing the various negative inputs and the US Dollar is picking up a safe haven bid as the cleanest dirty shirt in the laundry basket. The markets have actually priced in around  “15bp of easing at the 31 October meeting and a terminal rate of 0.94% (vs 1.88% currently),” according to analysts at Westpac.