The central bank magic trick: turning a dove into a hawk in plain sight

Price action in G10 FX markets this week has been driven predominantly by pricing in bond markets and the actions of central banks. This dynamic is set to continue next week as the battle against rising inflation migrates from the Bank of Canada and the ECB  to the Reserve Bank of Australia, the Federal Reserve, and the Bank of England. The RBA is up first and markets broadly expect the central bank to drop its yield curve control policy after the April 2024 bond, the last bond subject to YCC, rose above the 0.1% threshold on Friday and met no resistance from the central bank. The Federal Reserve is then set to taper its QE programme at a minimum on Wednesday night, before the much coveted Bank of England meeting on Thursday. Speculation is rife over whether the BoE will join the Norges Bank and Reserve Bank of New Zealand in hiking interest rates, but despite current market pricing we think the BoE will wait for more data and delay the 15bps hike until December.

Read Monex’s latest Week Ahead in full here:

DOWNLOAD THE FULL REPORT

Author:

Simon Harvey, Senior FX Market Analyst

Ima Sammani, FX Market Analyst

Disclaimer

This information has been prepared by Monex Canada Inc., an execution-only service provider. The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. No opinion given in the material constitutes a recommendation by Monex Canada Inc., or the author that any particular transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, it is not subject to any prohibition on dealing ahead of the dissemination of investment research and as such is considered to be a marketing communication.