Investors have started to price in the chance of the Federal Reserve cutting official interest rates below zero for the first time ever, with the January fed funds futures contract reaching a peak of 100.025 on Thursday in New York — a record high — indicating a policy rate of negative two and a half basis points.
Despite the U.S. Federal Reserve saying that it does not view negative rates as “appropriate”, a worsening economic downturn could force the Fed’s arm to expand its crisis response.
The April employment report is due at 8:30 AM ET (12:30 GMT), and will capture an entire month of lockdown measures that brought large parts of the economy to a standstill.
Economists expect that nonfarm payrolls plunged by 22 million last month.
That would be 27-times the worst monthly decline during the Financial Crisis and 11-times the record drop of September 1945, the demobilization of World War II, Bloomberg reported.
Elsewhere, the Turkish lira remains under pressure despite the country’s banking watchdog barred local lenders from trading lira with Citibank, BNP Paribas (OTC:BNPQY) and UBS, saying the three foreign banks failed to meet their lira liabilities.
The regulator has recently limited the amount of lira Turkish banks can make available to foreign investors and banks, in an attempt to make it tougher to bet against the local currency.
Turkey faces a relatively high $170 billion in external debt costs this year and has been burning through foreign exchange reserves at a fast pace, trying to defend its currency.
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