Risk-sensitive currencies fell. What about the U.S. dollar?

The risk-sensitive currencies, the Australian and New Zealand dollars among them, weakened on Wednesday, as the possibility of new coronavirus outbreaks dampened investors’ optimism. The Aussie stood at $0.6476 at last notice, after hitting Monday’s one-week high of $0.6562. Meanwhile, the New Zealand dollar dropped down by 0.6% to $0.6036.

On the other hand, the Euro traded at $1.0848 after rising by 0.4% in the previous session. But the British pound declined, almost reaching its lowest levels in five weeks at $1.2269.

The U.S. dollar hasn’t fared very well. It was subdued against other currencies as traders awaited Federal Reserve Chairman Jerome Powell’s speech. They speculated about the United States adopting negative interest rates.

The greenback traded at 107.21 yen in Asian trade. Thus far, it has changed little after lowering from Tuesday’s peak of 107.76, its highest point since April 24.

The U.S. economy seems to sink deeper into recession, fuelling the debate about policy responses. According to new data, U.S. consumer prices tumbled down by 0.8% in April. On Tuesday, U.S. President Donald Trump pushed the Fed to adopt negative interest rates once more.

Will the Fed cut interest rates below zero?

Powell planned to speak on current economic problems on Thursday. Fed officials have already declared that they do not see a need to cut interest rates below zero for now. While some market players expect Powell to stick to that script, others aren’t positive.

Powell’s message will probably be something in the line that the Fed is focusing its efforts more on credit easing than negative rates, – stated Kazushige Kaida, the head of FX sales at State Street Bank.

Meanwhile, Hiroyuki Ueno, the senior strategist at Sumitomo Mitsui Trust Asset Management, noted that he would advise against negative rates. Japan has already done that, but the perception there is that it wasn’t so effective. Ueno is concerned that Trump is talking about them. According to him, the past examples show that the Fed eventually does what Trump wants most of the time.