Traders erase bets on negative interest rates in US and New Zealand

Money market data shows traders have erased bets on negative rates next year in both the US and New Zealand, as noted by Bloomberg. While the Bank of England is still expected to cut rates to support the economy, it is seen stopping at the zero lower bound. 

Investors were pretty much convinced earlier this year that the Federal Reserve and the Reserve Bank of New Zealand would push rates below zero. However, prospects of sub-zero rates have weakened with expectations for a coronavirus-vaccine-led global economic recovery next year. Besides, central banks have been reluctant to take the sub-zero route and have resorted to a “new conventional” mix of bond purchases and sector-specific aid programs.

While the New Zealand dollar has benefitted from markets pricing out prospects of negative rates, the safe-haven dollar has struggled to find takers. The NZD/USD pair rose to a 32-month high of 0.7120 early this week.