No Interest Rate Hikes in Sight as Central Banks Turn Dovish

Currency watchers cogitating over how to trade Forex most profitably in the week ahead will have seen that last week’s key macros were dominated by the ongoing drama around crude oil, the US dollar, global equities and the progressively dovish tones coming out of central banks, all indicating that interest rate hikes are unlikely any time soon.


The dollar sustained its support over the last week even though inflation readings proved weaker than anticipated, a development that will almost certainly lead the Federal Reserve to remain on its dovish course, deferring any further interest rate rises well beyond the near-term.


Stock indices in the UK and the US both hit year-to-date highs last week, driven predominantly by recovering oil prices and the aforementioned dovish tones coming out of the central banks, from the European Central Bank to the Bank of Japan to the US Federal Reserve to the Bank of England. For those honing their Forex trading strategies, it is reasonably safe to bet that there’s no need to factor in interest rate hikes just yet.


The anticipated output freeze at the summit of major oil producers hit the buffers on Sunday, with no agreement being reached on how to boost wilting crude prices. Predictably, crude prices began tumbling, causing the NYMEX to plunge by 3.2 per cent on Monday as traders returned to sell-off mode for the commodity.


As for the week ahead, Forex traders may want to look out for the German ZEW Economic Sentiment data release and the minutes of the last meeting of the Reserve Bank of Australia’s monetary policy group on Tuesday, which will also mark the release of a range of central bank governors’ speeches, including BoE, RBA and Bank of Canada.


Wednesday will see the release of the UK’s annual earnings index and unemployment rate, while Thursday will see the release of the country’s retail sales data as well as the ECB’s usual press conference and rate decision.