John M. Bland, MBA, CTA
Central Banks Driving Markets
The major event in the week just past was the minutes from the March FOMC meeting. It was at that meeting that the central bank had announced that it was undertaking a new policy stance. The new policy posture was no longer to be data dependant, but focused on inflation expectations. There has been a growing concern in the central banking community that prolonged deflation exacerbated by negative interest rates is running the risk of entrenching very low inflation and sluggish growth.
As a result, it appears that major central banks are now acting in concert to do what they can to break the deflationary cycle and promote economic growth. They have thrown inflation concerns aside figuring they have the tools and knowledge to contain inflation if needed, but promoting growth in what economists call a "liquidity trap" is a lot harder. The Fed Minutes confirmed this market perception and it even appeared that many of the policy hawks reluctantly have bought into this policy change.
Current Market Conditions
The focus in the coming weeks will be on the next round of quarterly earnings which start this week. How the corporate sector is performing will be used as a key indicator of how the economy is likely to perform for the rest of the year, and in turn What future Fed policy is likely to be. All the markets are highly sensitive now to the prospects for future Fed policy. In forex, the key EURUSD pair is probably in a rough 1.10 to 1.15 trading range.
WEEKLY HIGH IMPACT NEWS:
01:30 CN- CPI
08:30 GB- CPI
12:30 US- Retail Sales
14:00 CA- Bank Of Canada Decision
14:30 US- EIA Crude
18:00 US- Beige Book
00:30 AU- Employment
11:00 GB- Bank of England Decision
12:30 US- CPI
14:00 US- University of Michigan Survey (prelim)
John M. Bland