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Dovish central banks

The dollar has failed to re-establish itself as the dominant currency following a retracement so far in October and yesterday’s economic data didn’t do too much to help it as PMI surveys were released lower than expected. Even though the Federal Reserve is expected to end QE III this week the market’s recognised that interest rate rises are a long way away as concerns over the outlook for global growth continue to mount. Not even the indecision and tangible concern in the equity markets is seeing the dollar benefit from its safe haven status.

As the month draws to a close the markets are focused on the FOMC meeting this Wednesday where there is no press conference this time round, but the wording in the accompanying statement will be very closely monitored in an attempt to see if the Fed’s stance has become even more dovish. This is swiftly becoming the norm for central banks now with even the RBNZ having to change its tone considerably from earlier in the year when it was hiking interest rates almost as if they were going out of fashion. Wednesday is due to see rates held again by the RBNZ, meanwhile expectations for further easing from the BOJ on Friday are increasing.

Central banks continue to battle against this disinflationary environment, but at some point the global economy will reap the rewards of the recent plunge in crude prices. For now economic figures remain a key focus and today we see consumer confidence from the US, an important data release, which is due to fall from 89 to 87.

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