A huge jump in Japanese stocks overnight is filtering through to European indices this morning where the FTSE 100 is due to open 100 points higher and German Dax up over 200 points. Whilst it would be romantic to think the FTSE 100 is cheering the Queen becoming the longest reigning monarch in British history today, the reality is that investors expect monetary easing from Central Banks around the globe to continue and tightening cycles to be put firmly on hold.
But whilst equities are set to bounce strongly, focus remains on Central Banks today and tomorrow with rate decisions from the Bank of Canada and Reserve Bank of New Zealand today, followed by the Bank of England tomorrow. It’s the RBNZ that is expected to move but rather than beat the Federal Reserve to commencing its tightening cycle it is amongst the Central Banks that is continuing its easing cycle. A rate cut of 0.25% to 2.75% is likely and even more is expected later in the year bringing the rate to 2.50% which would totally unwind the tightening the RBNZ undertook in 2014. Whilst NZDUSD has bounced overnight to 0.6380 the downtrend remains intact and bearish traders will be eyeing up a return to the sub 0.6000 area last seen during the banking crisis in 2009. Before the RBNZ the BOC is set to keep rates on hold at 0.5% and yet another dovish statement is expected. With further evidence of Central Banks worldwide maintaining their dovish stances and many continuing to ease, it makes it even harder to see the Federal Reserve raise rates next week.