13/01 – Dollar on backfoot after Fed speakers

Jeremy Thomson-Cook
Jeremy Thomson-Cook 13 January 2021


Comments from Bank of England Chair Andrew Bailey yesterday that underlined the mainstream opposition to negative interest rates sent the pound higher and allowed it to recover some of its recent losses.

Bailey’s comments that “there are a lot of issues with negative rates” and that “no country has used negative rates in ‘retail’ end of the financial market” suggest that while the Bank of England continues to explore such an option, the majority of the Monetary Policy Committee is not there yet.

His only other comment of note was that the ‘outlook for interest rates hinges on productivity growth’ which gives us a hint that Bank of England, like the Fed, will continue to run inflation higher than target in the coming months to allow for an overheating of the economy through the recovery.

Political news will focus on Boris Johnson’s appearance in front of the Liaison Committee this afternoon with a number of questions primed already for the PM; If the situation is worse now than in March last year, why are the rules currently in place less strict? … How many people need to be vaccinated before it’s safe to open up? … Does he think it’ll be March 23 before the strictest restrictions can be lifted?

The Committee hearing begins at 3.30pm.


With the slight downtick in the USD the euro has managed to recover slightly overnight although it remains on the back foot against the pound. We expect it to trade in a similar manner until the European Central Bank meeting a week tomorrow.


Two members of the Federal Reserve pushed back on the idea that the central bank was anywhere close to reducing the amount of support it provides to the US economy. “We want to get through the pandemic and sort of see where the dust settles, then we will be able to think about where to go with balance-sheet policy,” Federal Reserve Bank of St. Louis President James Bullard said on Tuesday with his colleague at the Boston Fed Eric Rosengren echoing those thoughts later in the day.

These comments have been enough to push both the US dollar and yields lower overnight and we expect to see a continuation of this move play out throughout the day with more Fed speakers due later.


A weaker than expected fix of the Chinese yuan and a slight fall in iron ore prices yesterday is keeping the AUD under wraps at the moment. The NOK however has maintained its bullish attitude and is pushing towards new highs as the oil price swells.

Have a great day.