daiwamegaforcetele90| If the Federal Reserve does not move, Asian central banks dare not move! The "big pie" is falling to Europe, which took the lead in cutting interest rates?

Financial Associated Press, May 10 (Editor Xiaoxiang) if the current changes in the monetary policy of the global central bankDaiwamegaforcetele90Compared to a game of "one, two, three wooden men", it is clear that the Fed, which is hesitant about the direction of inflation, and the Asian central banks, which are equally motionless at the sight of the Fed, are likely to stay where they are for longer. A number of European central banks, which have acted or are planning to do something, may be getting closer to the finish line.

As for this scene, what does it mean for the broader pattern of global financial markets? Some industry insiders have said this may be a sign that European equity and bond markets are on track to lead the global market for the rest of the year, as interest rate cuts will stimulate spending, slower inflation will be good for bonds and weak currencies will boost exports.

Many traders have reacted to the divergence in monetary policy on both sides of the Atlantic and believe that market capital flows are on the verge of a major shift.

The monetary policy differences between the United States, Europe and Asia are beginning to highlight.

In fact, although there are not many key economic data from the United States this week, the European market is not calm. European central banks, including the Bank of Sweden and the Bank of England, have timely sent a clear new signal that borrowing costs across Europe will fall earlier and more sharply than in the United States.

Although the Bank of England kept its benchmark interest rate at 5% on Thursday as expected by the market,Daiwamegaforcetele90The 16-year high of .25% remains unchanged, but the overall tone of the interest rate decision is clearly dovish.

The Bank of England finally decided by a vote of 7 to 2 to stand still for the sixth consecutive meeting, in which Deputy Governor Dave Ramsden and Bank of England official Swati Dhingra have resolutely voted in favor of an "immediate rate cut".

Andrew Bailey, governor of the Bank of England, said after the meeting that despite "encouraging news" of inflation and expected to fall close to the central bank's 2 per cent target in the coming months, the central bank still needed to see more evidence that inflation would remain low before cutting interest rates. However, Bailey was optimistic about current progress and hinted that interest rates could be cut as early as next month if the inflation outlook meets expectations.

Traders have further stepped up their bets on the BoE rate cut after the BoE's decision was announced.

It is worth mentioning that earlier this week, the Swedish central bank cut interest rates for the first time since 2016, and the SNB cut rates in March. These two central banks are the only two of the G10 central banks to cut interest rates.

Given that the ECB has previously hinted that it will cut interest rates in June, it is clear that the ECB is clearly taking the lead in the current wave of interest rate cuts in the world's advanced economies. This contrasts sharply with the Fed, which has been slow to move, and Asian central banks, which depend more on the Fed's face because of the currency defence war.

Now, while industry expectations of Fed rate cuts have risen in the past two weeks, the Fed is likely to cut interest rates as many as twice this year, possibly as early as September (given the pre-election window, there are doubts at this point).

With the postponement of the Fed's interest rate cut window this year and pressure on Asian currencies, Asian central banks are also in an extremely awkward position. If interest rates are cut before the Fed, it could worsen already weak Asian currencies, pushing up the prices of imported goods and services, and inflation could go up with it. Delaying the start of the long-awaited easing cycle could hamper the pace of economic recovery, and high interest rates could dampen domestic demand, posing a particular threat to countries with high household debt levels such as Thailand.

The Fed's policy path has long been seen as a key consideration for Asian central banks, especially those whose economies are sensitive to foreign exchange rates. Expectations of the Fed's tighter interest rate path have strengthened the dollar, and the dollar is likely to gain more support as a safe haven if fears of conflict in the Middle East intensify.

Last month, the Indonesian central bank unexpectedly announced a rise in interest rates, which is the most intuitive portrayal and helpless choice in this context.

In view of this, some economists and analysts have recently lowered their expectations for the Asian interest rate cut cycle.

Is the European equity and bond market expected to stand out?

According to the latest forecasts from the interest rate market, the Bank of England is expected to cut interest rates by about 55 basis points by the end of the year, the European Central Bank will cut interest rates by 70 basis points, and the Fed, which is still struggling with strong inflation, will cut interest rates by only 43 basis points.

This clear disagreement has made many people in the industry take a higher view on the performance of the European stock and bond market around the world.

Florian Ielpo, head of macro at Lombard Odier Investment Management in Switzerland, said he was bullish on European and British stock markets. While US stocks have contributed the most to the rise in global stock markets since 2020, Europe may now be at the centre.

Paul Flood, a multi-asset portfolio manager at Newton Investment Management, also pointed out that he is buying UK stocks from a valuation perspective and is bullish on UK government bonds because the Bank of England is more likely to cut interest rates in the future.

The FTSE 100 index, dominated by exporters, hit an all-time high after the Bank of England announced its interest rate decision on Thursday. The European Stoxx 600 index is up 2% so far this week and is on track for its biggest weekly gain since January.

Hugh Gimber, global market strategist at JPMorgan Asset Management, said: "the European economy is indeed accelerating, albeit from a low starting point, while the US economy is cooling from a stronger starting point."

It is worth mentioning that the last time the Bank of England's monetary policy deviated significantly from the Federal Reserve was in August 2016, when the Bank of England cut interest rates by 25 basis points to protect the economy from Brexit, while the Federal Reserve stood still and prepared to raise interest rates. The ECB has been a staunch dove between 2014 and 2022-eurozone interest rates have long been below zero, but have since followed the Fed at the point of monetary policy shift.

At present, some people in the industry believe that the risk is how far the European central bank can lead the Federal Reserve in cutting interest rates. Some say that while European government bonds are likely to outperform US bonds for the time being, they are likely to continue to fluctuate as the global inflation path remains unpredictable.

Lombard Odier's Ielpo said the Bank of England, the European Central Bank and other European central banks may regret sounding too dovish too early.

Neil Mehta, portfolio manager at BlueBay Asset Management, pointed out that the company is not optimistic about British bonds, in part because of the relatively high inflation rate in the UK. Mehta believes that this theme of monetary policy divergence may mainly be played out in the foreign exchange market, the US dollar will remain strong, and as import prices rise, Europe will face further inflation risks.