Research Team at ANZ, notes that recurring nightmares continued overnight with price action poor and flight to safety flows dominating. Key Quotes “Some of this can be put down to a delayed disappointment to Fed Chair Yellen’s testimony. Yellen had to recognise both the underlying strength of the US domestic economy while addressing the potential downside impact of heightened financial market volatility. That’s a tough balancing act to strike when markets are edgy. However, issues go deeper. Some price action reflects markets transitioning from liquidity as the key driver to fundamentals, particularly growth. Bad news is now being read as simply bad news. Gone are the days where bad news was good as it portended of more dovish central banks and more cheap money on offer. The past weeks have seen more from the BoJ, more on offer from the ECB, the removal of any tightening from the Fed and even other central banks acting partly in response to what other central banks are doing (i.e. the Riksbank overnight). It’s an absurd race further into negative interest rate territory. While global growth concerns are front and centre, the failure to stabilise sentiment signals that monetary policy is losing traction. Arguably we’ve been too reliant on that policy lever for too long. In the desire to fix the global economy’s problems via liquidity, more challenges have been created by the mispricing of risk and misallocation of capital. For more information, read our latest forex news.