Focus is back to central banks - Westpac
|Analysts at Westpac explained that the central banks have exhibited a hawkish tilt of late, sending bond yields higher.
Key Quotes:
"The Bank of Canada raised rates from 0.50% to 0.75%, the first hike since 2010."
"The Bank of England left rates on hold at 0.25%, but 3 of 8 members voted for a hike, up from 1 vote in May."
"The Reserve Bank remains on hold at 1.50% and the Governor delivered a neutral statement. Despite this, markets have priced in a rate hike for 2018. We continue to expect rates to be on hold throughout 2017 and 2018."
"Market pricing for hikes from the RBNZ has risen in recent weeks. This follows signs of firmness in economic activity and the rise in headline inflation back to levels around the mid-point of the RBNZ’s target band. However, we think market pricing for OCR hikes is too early, with low interest rates still a key support for economic conditions. Rising borrowing costs, mirroring the global trend, are having a dampening impact, reinforcing the case for the RBNZ on hold."
"ECB officials suggest the move from deflation to reflation does not signal a near-term shift in the stance of balance sheet or interest rate policy."
"Sentiment towards the Euro Area has remained robust thanks to favourable data and a much-improved political status quo."
"The EUR/USD held near its June highs circa 1.14 in recent weeks."
"While in the US, confidence has wavered, extending US dollar weakness, seeing the DXY down by over 6% from its early March peak."
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