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FXTM Market Outlook for Q3 2019: Will we see synchronised monetary easing across global central banks?

It is still unclear at this stage just how many other central banks across the globe will follow the footsteps of the Federal Reserve if and when it finally cuts interest rates.

The dovish shift in the Federal Reserve’s policy stance is likely to drive the dollar lower in Q3 Should negotiations between the world’s two largest economies hit yet another wall, the floor could give way beneath Oil It’ll be interesting to see if $13 trillion of negative bond yields lead institutional investors to jump into the world of crypto once again

By: FXTM Market Research Team

A number of central banks across the developing economies have eased interest rates in the hopes of overcoming challenges stemming from rising downside external risks, as the persistent US-China trade tensions have weighed on global growth. Russia, India, Malaysia, the Philippines and Nigeria are just some of the emerging economies that have cut interest rates to counter the global headwinds, while G10 central banks such as Australia and New Zealand have also eased their respective policy settings. It is still unclear at this stage just how many other central banks across the globe will follow the footsteps of the Federal Reserve if and when it finally cuts interest rates.

The question remains on the mind of many investors, as we start to see synchronized monetary policy easing across global central banks, whether the world will have to endure a never-ending low-interest-rate environment?

FXTM’s Quarterly Market Outlook Report for Q3 2019 examines in detail exactly how such monetary easing across the globe, US-China trade truce, Brexit and other major market developments could impact global currencies and commodities, as well as Bitcoin and other trending factors to watch out for over the coming quarter.

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Highlights from the report

-“The dovish shift in the Federal Reserve’s policy stance is likely to drive the dollar lower in Q3. […] This will result in a shrinking gap in interest rate differentials, with the yen likely to be the biggest beneficiary from another round of monetary easing, especially if trade uncertainty persists through the third quarter of 2019” –Hussein Sayed, Chief Market Strategist at FXTM

-On the GBPUSD: “Expectations that the Bank of England will step in with monetary stimulus, likely in the form of lower borrowing costs prevents GBPUSD extending beyond $1.30 anytime soon.[…]For the Pound to rise above $1.30 in the current environment, optimism has to gain serious momentum that the United Kingdom is either heading for a much softer Brexit than is currently envisaged, a potential second referendum or, as some optimists still hold hope for, no Brexit at all.” –Jameel Ahmad, Global Head of Currency Strategy and Market Research at FXTM

-On the EURUSD: “Investors shouldn’t kid themselves that the euro’s 1.38% appreciation against the Dollar in the second quarter reflects improved investor sentiment towards the Eurozone economy. […] The Eurozone economy remains vulnerable to a number of headwinds, meaning the path of least resistance for the Euro points south as we head into the second half of 2019.” –Lukman Otunuga, Research Analyst at FXTM

Read more: Risk sentiment cautious as trade truce paints the illusion of market stability 

-On the USDJPY:“The United States and China trade saga has extended into the second half of 2019 and investors have rushed into stock markets once again on optimism that central banks will come to the rescue with yet another round of monetary easing. Be careful of this narrative.” –Jameel Ahmad, Global Head of Currency Strategy and Market Research at FXTM

-On WTI CrudeInvestors might be remiss in believing that things are only looking up in the second half of the year. […] Should negotiations between the world’s two largest economies hit yet another wall, the floor could give way beneath Oil.”–Han Tan, Market Analyst at FXTM

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-On Gold“While the outlook for the precious metal points to the upside, potential roadblocks on the horizon include easing trade tensions and signs of global growth stabilizing. Both outcomes would pose a challenge to buyers” –Lukman Otunuga, Research Analyst at FXTM

-On Bitcoin“Although Bitcoin’s bumpy ride and wild fluctuations mean it’s too early to grant the digital currency safe-haven status, it’ll be interesting to see if $13 trillion of negative bond yields lead institutional investors to jump into the world of crypto once again.” –Hussein Sayed, Chief Market Strategist at FXTM.