It Looks Like the Beginning of the End of Central Bank Easing
Traders are now taking the long view on central bank easing, shifting focus to which monetary policymakers will be the first to change course and withdraw stimulus, according to Bank of America Merrill Lynch FX strategist Athanasios Vamvakidis. The euro-area, Japan, Norway, New Zealand, and Sweden are the five major developed economies in which central banks have eased policy this year — and by some financial metrics, they don’t have much to show for it. In all of these instances, currencies have strengthened rela- tive to the US dollar in the wake of more accommodative monetary policy. A possible counterpoint: it’s not necessarily that fighting central banks has worked, but that the Fed's dovish surprise in March has meant more to these currency pairs than easing. That argument might not fully pass the smell test as most of these domestic stocks markets have also declined since monetary policy became more accommodative.
So with currencies getting stronger and equities falling, Vamvakidis says “positioning for a scenario in which some central banks give up easing is worth the cost.” — Bloomberg