Three little doves
Well, it has been quite an eventful week with three shifts in central bank policy. It is weeks like these which create really good learning lessons for beginner traders. Why? Because they show the impact of central bank policy on the currency markets. Let's go through the events briefly of the three central banks and their change of policy
Three banks changing tact
First was the Reserve Bank of Australia on March 5
RBA's Lowe summed up the change in policy by saying that it is 'difficult to imagine rates will rise in 2019'. He stressed that the labour market was key, but acknowledged that GDP data had been soft as late. Inflation levels have been consistently low as Eamonn reminds us helpfully, but the RBA has an almost eternal optimism that inflation will come. The upshot of the meeting was a dovish tilt and the AUD sold off after the meeting. Traders could have uses technical places to enter short on breakout or retracements.
Second of the bunch was the Bank of Canada March 6.
The BOC left it's rate unchanged (no surprise0), but it altered it's previous confidence on the timing of future rate increases in it's rate statement . This was a clear dovish tilt and the CAD was sold off instantly with the release. Traders locked into the event would have taken a quick long USD/CAD to scalp a few points on the change of guidance.
Third was the ECB meeting on March 7
Again, another very simple scalp trade was possible with the ECB changing forward guidance on rates from the previous date of this summer 2019. More EUR weakness now looks set to continue for the short to medium term.
Take the lesson
Three central banks shifting their outlook, three new bearish biases for the AUD, CAD and EUR and, importantly, three opportunities. So, if you have been ignoring the market fundamentals this week has provided three reasons why you should pay attention to them. Three reasons to make pips.
