The Fed Open Market Committee will meet this week to discuss monetary policy and the possibility of the first U.S. rate hike in years. With dovish sentiment dominating the global dialogue of central banks, keep an eye on additional policy meetings from Sweden's Riksbank, the Reserve Bank of New Zealand and the Bank of Japan.
Last week featured two relatively important central bank meetings, with both the Bank of Canada and the European Central bank coming off as relatively dovish relative to the market’s expectations. As we look ahead to central bank action in the coming week, the Federal Reserve and Bank of Japan are looking increasingly likely to sing a similar tune.
Mario Draghi, the Pied Piper of the European Central Bank, played a familiar tune and the markets followed. Global stock markets soared as the man with the magic flute (or is it a printing press) vowed that he is ready to act if needed and is open to a whole menu of monetary policy instruments to root out the rats of disinflation that signals risk to growth.
Stocks rose in the United States and Europe and the dollar hit a three-week high against the euro after European Central Bank President Mario Draghi said further rate cuts were being considered to stimulate the euro zone economy.
With the prospect of a further easing from one of the world’s most important central banks, you would expect to see strength in commodities like oil, gold and other metals, but the accompanying dollar strength appears to be overwhelming this effect.
The U.S. dollar was up after European Central Bank Chief Mario Draghi took a dovish tone on the states of the broader European economy. The dollar gained against safe-haven currencies like the yen and the Swiss franc and was boosted by a surge in the U.S. markets thanks to stronger-than-expected earnings from a number of firms.