Wednesday February 6, 2019 - 17:01:33 GMT
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Central Bank Monetary Policies Mostly On Hold As Global Growth Slows
John M. Bland, MBA, co-founder, Global-View.com
Its an interesting time in the global financial markets with major central banks just about all with future policies on hold. This is resulting in forex trading just about on hold. The key driver for forex markets tends to be current, and market expectations for future interest rate differentials. A major driver of global interest rates often is the Fed. Chair Powell recently has been a source of money market instability due to imprecision in public comments. Hopefully he has now learned that the markets hang on every single word he utters. We have seen some more experienced central bankers read from a script at times to make sure the markets not misinterpret any word when a policy message is being sent. The current message from the Fed is that policy is mildly dovish, but data-dependent. In other words, policy presumably will be on hold for a significant period of time. Personally, I feel that Powell was more explicit than he needed to be in his most recent comments. There was no necessity to lock himself into a policy going forward with the U.S. economy in flux. Nothing makes a central bank look worse than flip-flops in policy. If the economic outlook is uncertain, then there is no problem in saying so.
Policy at the European Central Bank has been on hold for a good while, and the central bank has been struggling recently with a slowing Eurozone economy. Italy is already in a technical recession and Germany is on the cusp of falling into an economic recession as well. President Draghi has already stated that policy is on hold until at least late summer. Some are saying that a rate hike before yearend is increasingly looking as unlikely.
The Bank of England is meeting next on February 7. No0 change in policy is widely expected at this meeting. Some are talking about a possible March hike, but I can’t see the central Bank taking any actions until Brexit negotiations re settled. The Bank of England should have little interest in increasing market uncertainty at the present time. They should be in no rush to do something now.
The Bank of Japan has an economy that cannot get out of its own way. Policy should remain on Hold indefinitely.
As for Canada and Australia, the Reserve Bank of Australia policy has just shifted overnight to a neutral from a hawkish to a neutral bias. Policy is on hold. The Bank of Canada is likely to follow the lead of the Fed and the strong U.S. economy to the South. There is no reason at the present time for BOC policy to diverge from the Fed.
GVI Trading. Potential Price Risk Scale
AA: Major, A: High, B: Medium
Mon 11 Feb 2019
A 09:30 GB- Production/Trade/GDP
Tue 12 Feb 2019
No Major Data
Wed 13 Feb 2019
A 09:30 GB- CPI
AA 13:30 US- CPI
A 16:00 US- EIA Crude
A 23:50 JP- GDP
Thu 14 Feb 2019
A 10:00 EZ- GDP
A 13:30 US- PPI
Fri 15 Feb 2019
A 09:30 GB- Retail Sales
AA 13:30 US- Retail Sales
A 15:00 US- Final Univ of Michigan
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