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Analysts at Nomura suggest that last week (11-15 June) the markets’ attention was focused on monetary policy meetings held by the Fed, the BOJ, and the ECB all in the same week and it is possible to interpret the conclusions reached by all three central banks as an indication that the normalization of monetary policy is approaching its final stage.

Key Quotes

“There are three reasons for this view: (1) the decline in momentum of the global cyclical economic recovery; (2) the turmoil in emerging economies and financial markets as a result of the tightening of the US dollar monetary environment; and (3) the increasingly uncertain outlook for the global economy as a result of US trade policy.”

“If we take the view that signs of an end to the global move to normalize monetary policy have begun to appear, this leads us to the conclusion that it is now even more likely than before that monetary policy normalization by the BOJ will lag behind that in other regions.”

“Meanwhile, as the risk of a global economic downturn increases amid growing uncertainty around US trade policy and turmoil in emerging economies, we see a possibility of a recovery in the market’s appetite for risk as market participants factor in the end of monetary policy normalization.”