§ Recent major central banks’ hawkish assessment of economic outlook and expression of interests to remove some degree of monetary stimulus have resulted in majors’ bond yields and currencies surging at the expense of the USD.

§  Recent major central banks’ hawkish assessment of economic outlook and expression of interests to remove some degree of monetary stimulus have resulted in majors’ bond yields and currencies surging at the expense of the USD.

§  There are 3 immediate repercussions:

―     ECB, BoE, BoC’s monetary policy divergence with the Fed will slow and perhaps even converge at some point later. This initial shift is expected to weigh on the USD and support the EUR, GBP, CAD for now;

―     Withdrawal of monetary stimulus should tighten monetary conditions and weigh on risk sentiment, exerting downside pressure on Asian currencies (i.e. KRW, TWD, PHP, THB,) that are typically sensitive to risk sentiment;

―     Ongoing monetary policy divergence between BoJ and Fed should add to upward pressure for USDJPY