Central Banks Holding Back

15 June, 2016

There is only one direction in markets at present and that’s avoiding risk at nearly all costs. The fall below zero on the 10 year German government bond yield yesterday was the latest manifestation of this, but it can be seen pretty much everywhere. Next week’s EU referendum vote in the UK is the primary reason for this and between now and then, there’s unlikely to be any escape from its grip. Investors are unwilling to take on positions that are likely to be negative effected by the UK’s potential exit from the EU. In FX markets, this can be seen in the continued rise of the yen, with the Swiss franc also gaining to 6 month highs against the single currency. Both the SNB and BoJ meet this week to discuss policy (BoJ overnight to night and SNB tomorrow), but neither are likely to react to the latest moves in markets, which could be unwound quite aggressively should the UK vote to remain in the UK. So for now, words are likely to be the more utilised tool that actions.

Talking of central banks, we have the conclusion of the June Federal Reserve meeting in the US this week. No move in rates is now seen, so it’s going to be a question of listening to the press conference and also the latest staff projections on the economy. Recall that back in December, members were looking for four rate hikes this year. After today, there will be only four meetings left, so even if we see that scaled back to two, it will represent a fairly significant pick-up in the tightening pace. At most, I see once move this year and there is a growing risk that if seen, it will have to be reversed in the coming year.


Source link  
BOJ Monetary Policy Remains Steady

The Bank of Japan maintained their monetary policy on Friday whilst upgrading their assessment of private consumption...

Final Confirmation for a June Rate Hike

The crucial US labour market data for May will be released today, June 2nd at 13:30 BST. It includes non-farm payrolls...

GBP Under Pressure

The Brexit negotiation process is one of the focuses of the upcoming UK election. Although the Conservative Party has pledged a smooth and orderly...


Oil Slumped Post OPEC Extension

On Thursday, OPEC announced that the existing output cut agreement will be extended for an additional 9 months...

USD Bounces From Month Low

Trump administration has presented its 2018 budget plan to Congress last evening. The budget plan calls to slash $3.6 trillion...

Dollar index hit a new low

The dollar index hit a new post presidential election low of 96.95 on Friday May 19th. EUR/USD hit a high of 1.1211...


USD Hit Post Election Low

To date the dollar index has almost given up all of the post presidential election rally...

BoE Expected to Keep Rates Steady

ECB Governor Draghi will make a speech in the Dutch Parliament at 12:00 BST today. It will be Draghi first speech...

Trump's Tax Reform Plan

US Treasury Secretary Mnuchin announced Trump’s tax reform plan in a press conference...

  


Share: