Kit Juckes, Research Analyst at Societe Generale, explains that there’s a lot of central bank communication in the past week, in the absence of significant economic data while in the US, central bankers appear to be leaning against any downward revision to expectations about the path of future rate hikes.

Key Quotes

“The market was briefly pricing the odds of a solitary further move being higher than those two. Last week’s comments from FOMC members appear to have sorted that out (for now, at any rate). By contrast, ECB Council members are leaning against the market’s inclination to price the possibility of rates being slightly higher by year-end.” 

“The net effect is that the Fed has succeeded in putting a floor under Treasury yields and in the process a floor under the dollar, while the ECB has managed to cap yields and the euro. Volatility-junkies are not amused. Investors are looking further afield and over March as a whole, the top currencies were the Mexican peso, the Russian rouble, the Polish zloty, Indian rupee and South African rand. The rand is tricky as in the midst of the current Zuma/Gordhan showdown, but we’d like to buy a politically-inspired sell-off and the others are all currencies we like. If FOMC and ECB guidance keeps major bond yields in ranges at relatively low levels, investors will go looking for yield elsewhere.”