Central bankers are regaining their edge on the markets over politicians

My interview with FXstreet.com

The original article was published here

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So, the Fed triggered a 'dovish hike', Draghi was a bit more hawkish and there was a BoE member voting for a hike. What's the currency mostly benefitted by these recent central bank moves?

I think we should see some good counter trend trades in reaction to this shift in stance by the ECB and BOE. We must understand that once the US starts to normalise monetary policy, we will see the other Central Banks follow suit with a delayed effect. One must look at the EURUSD, GBPUSD, AUDUSD and USDCAD pairs to exploit temporary weakness in the USD. Of course, trading USDCAD, one must keep an eye on Oil prices given its positive correlation, and for AUDUSD, metals and LNG prices.

Are central bankers regaining the edge over politicians on having a stronger market impact?

Certainly. I think we are seeing monetary policy used as the basis to moderate and stimulate economic conditions in domestic economies, with a push away from Keynesian and Fiscal Policy measures. As most developed economies carrying large GDP to Debt ratio's, there is little room for Governments to instigate large fiscal stimulus, hence the using the route of monetary policy.

Is the EURUSD still bearish mid and long-term wise?

I think we are near the bottom end of this pair, and so I think we are range bound here from 1.04 to 1.10. Of course the US is on track for 3 hikes this year, and a few more in following years, so this should minimise any upside in this pair, but as the ECB may shift to normalising rates also in due time, it could limit downside and possibly lead to a change in direction on this pair.

What about the USDJPY? It's a pair that seems to be lacking clear direction during the early months of the year. Will it stay in the current 112-115 range?

Given the strong correlation between Equities and the JPY, largely due to the carry trades used on this currency, I still think we are currently in a bull market that is heavily supported in Equities. On that basis, I believe it is buy the dips on this pair, and we must watch for a break to the upside even despite the slightly dovish call from the Fed the other day. The BoJ is in no position to tighten monetary policy, so I'd stay long on this pair with dips.

Do you think OPEC producers will be able to return oil price over 50$ or is the crude going for another bearish run on more oversupply?

As OPEC and non-OPEC members agreed to cut oil supply, this has largely been offset by rising shale production in the US. I think the oil price is range bound for the next couple of years, and the upside is probably capped around USD55/bbl, and strong support below USD40/bbl.