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Essential

Dovish

Dovish describes a central bank leaning toward rate cuts or looser policy, which usually weakens its currency.

Quick answer

Dovish means a central bank leans toward rate cuts or looser policy. Dovish surprises usually weaken the currency because lower rates make it less attractive.

Definition

Dovish describes a central bank or policymaker inclined toward looser monetary policy: interest rate cuts, expanded bond buying, or a slower path to tightening. Dovish surprises tend to weaken the currency because lower rates make it less attractive to hold. It is the direct opposite of hawkish.

How It Works

  • Used to describe decisions, statements, minutes and speeches
  • A dovish cut with more cuts signalled is weaker for the currency than a one-off cut
  • The opposite is hawkish

Trading Tips

1

Dovish central banks make their currency a funding currency for carry trades

2

Watch for the market pricing the next move - the reaction is about the path, not the level

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