Central bankers change direction
In the world of finance, central bankers run the game. After the global recession of 2008, they flushed the mar- kets with huge sums of money to ease the burden on financial institutions, lenders and even corporations. But last week, the heads of the U.S. Federal Reserve, the European Central Bank (ECB) and the Bank of England changed the rules: Rising interest rates are on their way.
As companies became addicted to zero rates, and sometimes less than zero, a raise in interest rates will affect every institution in the corporate world. ECB President Mario Draghi signalled a gradual exit from expansionary monetary policy in a speech at a central banking forum in Sintra, Portugal. Any change in the ECB’s policy settings increases the chances of a follow-on move by Denmark’s DNB, Sweden’s Riksbank and the Swiss National bank.
The result is a fairly dramatic change in the parameters governing the G10 forex market, which has fed a dramatic turnaround in sentiment regarding the dollar. Also, Bank of England Governor Mark Carney spoke about the consideration of a gradual rate rise in coming months. Here are analysts’ responses to the changing environment in the monetary policy of the G10.