Dovish or Hawkish? Every time a central bank representative such as Fed Chair Powell speaks, traders categorize their language as either hawkish or d
Dovish or Hawkish?
Every time a central bank representative such as Fed Chair Powell speaks, traders categorize their language as either hawkish or dovish. This binary distinction aims to signal whether banks will raise (hawk) or lower (dove) interest rates as a part a bigger plan of either restrictive or expansionary monetary policy, respectively. Traditionally traders can expect hawkish policies to lead to appreciation in the country’s currency, whereas dovish policies often weaken the currency.
In his recent speech at the ECB Forum, Fed Chair Powell said he, “wouldn’t take moving at consecutive meetings off the table.” A message such as this translates to more rate hikes in the near future, and an overall hawkish stance. Traders will look to USD pairs with the expectation that the currency will be strong in the months to come as interest rates are expected to rise at one of the next Fed meetings.
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