Talking Points:
• Expectations for global monetary policy has dropped further into dovish territory this past week
• Stimulus and hikes will be a key factor in risk taking moving forward
• For FX, over-stretched forecasts for policy adjustments will likely leverage large USD, EUR, GBP and JPY moves
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Monetary policy has been a key fundamental driver for the global financial markets these past months and it will no doubt be a deciding factor in underlying trends moving forward. From a general perspective of investor sentiment, the support of accommodative monetary policy has become a necessary pillar of optimism and positioning. In fact, we may even be at a point where fresh infusions are necessary at regular intervals around the world or we risk a necessary speculative rebalancing. In the past few months amid rising concerns of global growth, China and emerging market capital flows; we've see expectations shift dovish. This shift has happened for hawkish and dovish bank/currency alike. However, the speculation is likely overwrought. Some currencies are positioned too bullish or bearish (hawkish or dovish). We discuss which are the most stretched and which are more immediate opportunities in this weekend Trading Video.
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