Bilal Hafeez, Head of Global G10 FX Strategy, has been looking at the behaviour of national markets after central banks that have moved to negative rates.
Central banks all around the world are moving towards negative rates in order to try and stimulate their sluggish economies, and today the Bank of Japan announced they will continue to ease, by way of additional ETF purchases and dollar funding .
As shown in the chart below, currency performance is mixed (JPY and CHF have rallied, while EUR and SEK have weakened), but equity markets weaken – only Sweden has been able to eke out a small gain. So the choice facing these banks is whether to continue on this path of negative rates, or instead try a new path of targeting equity markets and domestic demand directly through central bank asset purchases and fiscal stimulus.
Performance of markets since central banks first cut rates to negative:
For more information about the Bank of Japan's decision, read our report entitled "What the BOJ told us today".