How far away are more normalised monetary policies?
As price stability is the main goal for central banks, the rising inflation in some countries is likely to call for a normalisation in their ultra-loose monetary policies. The Bank of England has already hinted the market that the tightening cycle could start sooner than expected. In the US, Fed Chair Yellen, after neglecting the rise in inflation, is starting to acknowledge upside inflationary pressures. We suspect that the persistent rise in inflation will force the Fed to act sooner than later. In Australia, inflation has reached the upper end of the RBA’s target range, indicating that a rate cut is highly unlikely. Finally, in New-Zealand, the central bank has already started its tightening cycle. Despite the recent pause, potential oversold conditions in the Kiwi should offer good entry points for carry seekers.
Read the full report: FX Research