Morning Commentary: The Global Nocebo Effect

Foreign Exchange - Morning Commentary
The Global Nocebo Effect
Share this story:
David Atkinson
David Atkinson
Foreign Exchange Sales Manager
Today, you will probably learn a new word.  I had never even heard the term “nocebo” until hearing it on a financial markets podcast last week.  The medical definition of the nocebo effect is when “negative expectations of the patient regarding a treatment cause the treatment to have a more negative effect than it otherwise would have.”  The podcast I was listening to used the term in relation to low and negative interest rates, with the idea being that failure of such interest rate policy to spur activity in places like Europe just ends up making the situation worse.

Yesterday, I wondered if the Fed’s surprise 50 basis point rate cut would produce the same result after stocks tanked yet again by 2-3% and the US 10-year Treasury sank below 1% for the first time in history.  As we walk in today, things are not quite as bad.  Asian equity markets were somewhat mixed but overall nearly flat overnight.  European stock markets however started a rally of about 1% that has carried over into the US trading session.  The US 10-year is still below 1% but just barely.

As to where markets go from here, futures markets are almost fully pricing in a 10 basis point rate cut at the ECB’s meeting next Thursday, which would push the negative deposit rate from -0.50% to -0.60%.  Yeah, that will really help……Elsewhere, the market is almost fully pricing in a rate cut from 0.75% to 0.50% at the next Bank of England meeting on the 26th of this month. Markets expect more cuts in Australia, New Zealand and India.  Even after the 50 basis point shocker from the Fed yesterday, expectations are for yet another cut – at least 25 basis points if not another full 50 – at the upcoming March 18 meeting.

The other big news of yesterday was the Super Tuesday Democratic primaries.  As Saturday Night Live’s Weekend Update quipped, “Easter came early this year as someone just rose from the dead.”  That of course is the relatively strong performance by Joe Biden, who was written off as the Democratic nominee before his trouncing of the rest of the field in South Carolina.  We strive to stay politically neutral in this commentary, but politics do affect markets and there is a lot of commentary this morning that the bounce in US stocks are partly due to markets being happy to see Biden’s results at the expense of Bernie Sanders.

The US dollar is within fairly tight ranges today, much like it has been doing for the past several months in general.  Currency market eyes today are on the Canadian dollar as the Bank of Canada became the latest central bank to cut rates, which it did today by 50 basis points and noted that it will be “ready to adjust” further if needed.  Remember that less than a week ago there were essentially zero expectations of a rate cut today. 
If we can help you with any Foreign Exchange needs, please email or call (800) 447‑4133.
Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos!
Follow City National Bank on social media:
Facebook Twitter LinkedIn Google Plus YouTube
Non-deposit investment products:
Are not FDIC insured,
Are not deposits or other obligations of City National Bank and are not guaranteed by City National Bank, and
Are subject to investment risks, including possible loss of the principal invested.
This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. City National Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.
Unsubscribe from this list  |  Update email preferences
This message has been sent to Please do not reply to this email. To ensure the delivery of future emails, please add to your email address book or safe sender list.
Copyright ©2020 City National Bank – All Rights Reserved.
350 South Grand Avenue, 12th Floor, Los Angeles, CA 90071
City National Bank is a subsidiary of Royal Bank of Canada.
Equal Housing Lender
NMLSR ID# 536994 | City National Bank Member FDIC


Popular posts from this blog

Acquisitions or Alliances: What's Your Growth Strategy?