by Anthony B Sanders
At least the US Federal Reserve has been raising its target rate, albeit slowly, to 1.5%, The European Central Bank (ECB) has left its main refinancing rate at 0% since early 2016. And Bank of Japan’s key interest rate is negative. Of the three central banks, only the US Federal Reserve is raising rates.
The impact of the ECB’s decision to keep their key rate at 0% (a TRUE zero interest rate policy [ZIRP]) is that now 18 European countries have negative two year sovereign yields.
The USDEUR cross is tumbling.
As in the USDJPY cross.
The most priceless quotes of the day came from US Treasury Secretary Steven Munchkin and the ECB head Mario Draghi:
FRANKFURT—European Central Bank President Mario Draghi criticized remarks by U.S. Treasury Secretary Steven Mnuchin that a weak dollar benefits U.S. trade, signaling a fresh economic policy rift between European officials and the Trump administration.
Mr. Draghi attributed some of the euro’s recent gains to “the use of language that doesn’t reflect the terms of reference that have been agreed.” He warned at a press conference that such language violated longstanding international agreements designed to prevent currency wars.
Draghi is upset that Munchkin said that a weak dollar benefits US trade?? What planet has Draghi been living on?
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