Hawkish vs Dovish Explained: How Central Banks Move Forex, Gold & Indices | Day 2

Añadido: 2026-05-30

[00:01:17]All right, guys. So, this is the second part of the fundamental athon that I'm going to give you guys.

[00:01:25]So, today we're going to focus on hawkish versus doubbish. Uh, I get this question a lot. What does hawkish and doubbish mean? So this should definitely help you moving forward, especially when the end of the US and Iran war finish, right? Markets is going to go back to focusing on monetary policy. So if you're able to understand like what is a hawkish or dovish move, like how does this impact the central banks, this is what's going to really help you identify really good tradable opportunities, right? So what does hawkish or dovish mean and why tone matters and how to use it in real trades. So, this is what we're going to go over and I promise it won't take long, you know, but it's going to be a lot of educational fundamental education for you guys for the next few days. So, make sure you subscribe and like the channel as well.

[00:02:15]So, build up a hawkish or dovish trading bias. That's the main purpose, right?

[00:02:20]So, this is the framework, right? When it comes to the context, you want to focus on the context, the expectations, the catalyst, the reaction, and then there's your execution. So, one of the questions that you need to ask is the bank fighting inflation or supporting growth is very key. Are cuts being priced in or being priced out? Which asset expresses the idea best? And where is my invalidation? So today like when whenever you watch this video but uh May 28th we had PCE data which did come out lower than expected. The problem is is the is the bank actually trying to fight inflation? One of the questions is yes, right? Uh or is there supporting growth?

[00:03:08]Right? So are cuts going to be priced in or priced out? So when you're trading those type of data events, this is why the markets reacted the way that it did today. This is what actually gave us more confidence in a direction. So let the macro build the idea and let the price action confirm the execution is actually key. So when you're looking to understand how a hawkish expectation versus a dovish expectation works. So understanding how the central bank tone changes the assets behavior.

[00:03:45]So when we look at hawkish right so usually this would mean higher for longer bias when it comes to interest rates or you will hear a tone like inflation is still a concern inflation is still high. So especially when you're trading rate decisions this is what's going to be extremely important. Uh hike possible right or cuts are being delayed. This is where where we hear that type of tone like like uh hiking interest rates as possible, right? Or we're looking to hike interest rates, then if we see that they're not likely to cut interest rates, right? So, normally when it comes to the central banks, they're not very blunt. They're not going to just tell you the information, oh, like we are we're going to hold rates for the for the next three, four meetings, right? They're not going to say stuff like this, but they're going to give you a sort of of little like breadcrumbs where it could help you understand is this central bank being more hawkish or dovish. So, understanding the tone, right?

[00:04:47]Understanding these key words is what's actually important. So, this is why this is uh really key and make sure you put this for your notes. And uh usually supports the US dollar, right? if we we get a hawkish central bank and not just the US dollar but I'm using that for an example but this does support a stronger currency so when we get a hawkish bias it typically supports uh the currency gaining strength now it often push ups the yields right so it all what what happens when we get a hawkish bias it it supports the the currency but it also supports the yield of that currency as well. Okay.

[00:05:30]And when we get this, it pressures gold and US equities. So when we get a hawkish bias, if a central bank is likely to hike interest rates, you have to understand it. So it's never going to be different. If we get a hawkish bias, it's going to support stronger dollar.

[00:05:48]It's going to cause the yields to push higher. That's why gold gets lower and equities go lower, right? Especially for the US dollar. But the same tone is for another central bank as well. The difference is you're not looking at gold. So if you're trading like an example, the United Kingdom, right? If we get a hawkish bias, you expect the GDP currency to gain strength and the UK 100 to get weaker. All right? So very very simple when when it comes to that.

[00:06:17]Now when it comes to a dovish policy, right? Just everything is opposite. if they support more supportive of growth.

[00:06:24]So that means if growth is actually worse than expected, if growth recession fears are an issue, the central banks is going to want to be more dovish, meaning that they're going to want cut want to cut interest rates to help the growth of the economy not really get any worse.

[00:06:44]Okay? if inflation is easing. So if inflation is heading lower, right, especially if it hits their target, this is where we could get a doubbish bias or if they if rate cuts is more likely to happen. If we see that central banks is leaning more towards rate cuts, this is where we get that dovish bias and then that is where we see that the US dollar or the currency gets weaker and that's what pushes the yields lower and that supports gold and equities to push higher. All right, so just remember that because today is a perfect example of that. We had weaker GDP data and then we had uh we had weaker GDP which is weaker growth but we also had weaker inflation which was PCE. So when those prints came in worse than expected this is where we got a dovish reaction immediately from the data. That's why we saw the dollar gain strength and we saw uh we also saw that gold spiked we saw that gold spiked lower uh sorry we saw that the dollar pushed lower uh and then we saw gold go higher and equities go higher. right?

[00:07:51]Because that the inflation data and we saw that growth pushed lower. So it supported a dovish reaction. So that's where we again we saw that the dollar got weaker but it also pushed gold and equities higher. So that's where like when you're trading those type of events, this is what you're looking for.

[00:08:09]All right? Because the markets repric the path of policy. Okay? So that's the main key that we're focusing on. So how to trade it? So turn central bank's tone into pract uh practical trade plan a trading plan.

[00:08:27]So you have to know the event. Okay. So know the event that you're going to trade. Is it impacting inflation? Is it impacting growth? Right? So know what's being priced in. So when you're looking at the data, right? Is inflation expected to go lower or is if inflation is expected to go higher? That's one of the key things that you have to focus on, right? So when you're pre when you're looking at these events pre before you start taking a trade, then you have to start building a scenario.

[00:08:54]Okay, if the data comes out this way, will it support a hawkish bias? If the data comes out the opposite way, will it support a dovish bias? Right? So you have to always have these two scenarios.

[00:09:05]It's never you're never going to figure out like, oh, I'm 100% expecting today to be a hawkish day. You're never going to figure that out, right? But you always have to have a bias, which is extremely key. Always have a bias. And then pick the asset that you think expresses that right idea for a hawkish or dish scenario. So if you're trading NASDAQ, if the data comes out hawkish, right, it supports a hawkish bias, you know exactly which direction NASDAQ is going to go, right? it like knowing that oh okay if the data supports a hawkish bias hawkish is usually going to be bad for the uh the NASDAQ right so if it does come out as a doish scenario I know that that's going to support equities like NASDAQ to push higher so you're going to be able to have a really good idea and know how to trade it based off of these scenarios that you wait for the reactions then to break a structure and always make sure that your risk is is always cute right always know what what you're trying to risk and know where the trade is going to be if it feels that is invalid, right? So, just like uh an example, if the Feds sound more hawkish than expected, you have to like understand this like make it make sure that you understand this, right? The dollar is going to gain strength or whatever currency that you're focusing on. And what actually helps is the yields, right? So, like for the dollar, it's US10Y.

[00:10:32]So if you're looking at the yield, if the data comes out hot like uh supporting a hawkish bias, the yield is going to be the the focus where it could give you the idea if the markets care about the data. So if the yield starts spiking higher, that's where you could start expecting gold to push higher too.

[00:10:52]That's where you would have more confidence that gold would push lower.

[00:10:56]And then if you're looking at the stock indexes, right, like NASDAQ, S&P 500, or Dow Jones, you could expect that to start pushing lower. All right? So, trade the surprise, then the pretty much then the headline alone, which is the really the main focus when you're looking at trading economic data today, okay? Because the war is what's really impacting the markets overall. But eventually, the war is going to end. And I want you guys to be aware of that because the moment the war finishes, the markets is just going to go right back to focusing on monetary policy, which is are the markets going more hawkish or dovish and then it's going to be uh reacting to uh economic data and it's just going to be focusing on central banks. So you have to know this information because the war is not going to last forever. So now for you guys that don't know right like everything that I do here you do get access to all this information inside the discord group. So when you join you be able to trade live this is what we go through every time we trade a live session we focus on economic data because the goal is to trade with reasons. So when we have our reasons, this is how we're able to make those uh scenarios and those probabilities because if data goes higher or lower, we're able to determine how the markets is going to react.

[00:12:14]That's how we're able to always have an edge, right? And we also know when to stay away. Uh you also get access to the fundamental course, right? So everything that I'm explaining now is more into detail in the courses. You got hours and hours and hours of educational videos that breaks down central banks and economic data and news events. Plus, you get market updates and trade ideas throughout the day. And the VIP, if you want access to VIP, uh it's more deeper breakdowns. But the whole purpose of joining the community, right, is just to build your discipline and actually grow as a trader because the goal should be to able for you guys to trade full-time.

[00:12:49]That is the actual goal, right? To start making money with trading. And if you don't really know this stuff, this is what's really handicapping you of having an edge in the markets. Okay, so you just I just hope that this helps you guys. So what does hawkish and dovish mean?

[00:13:06]So hawkish is fighting inflation, right?

[00:13:10]So also it is open to higher rates.

[00:13:15]It can delay rate cuts. It is usually t tighter monetary policy tone. So when you hear the words hawkish, this is literally what that central bank is referring to. Okay? It's either one of the one of the one of these things is what they're referring to, right? So if you hear hawkish, you have to know that, okay, they're looking to fight inflation. How they looking to fight inflation? Raising interest rates, right? They're open to higher rates or leaving rates extremely high, right? So also it could be a tone of delaying rate cuts. They're not agreeing with actual rate cuts, right? And usually it's keeping tighter monetary policy. So when you hear these type of words from a central bank, that's what gives you the idea that central bank member is a hawkish member. Okay? So it normally means that they're trying to keep interest rates higher. And if they're trying to keep interest rates higher, that supports that they're going to want the currency to gain strength, but they're also leaning towards a weaker stock market. Okay? So, when you hear the term dovish, this is where they're support they're supporting growth, right? Because when they're dovish, they want to cut interest rates. And when you cut interest rates, that is good for the economy. That is good for businesses, that is good for credit, that is good for money flowing into the markets. So that means they're open to lowering interest rates. So that means they're wanting to cut interest rates. They're more comfortable with rate cuts. And it usually means easier policy tone. So when you hear a easier policy, that means that they're trying to allow access to money to be a lot easier for businesses and people. So the more money you get access to, right, the more better you could do when it comes to your business. out now. You could hire more people, you could build better, right? So that's what they mean when it comes to a dovish policy, right? So why traders care? The tone can shift market expectations. Okay? So guidance can move the dollar, the yields, gold, and indices or any currency. All right? So don't just like let it stop at the dollar. Just an example. It can move any currency. Right? So it's not just the rate, it's the outlook as well. So the core idea is that the markets react to policy direction and not just today's rate. So they're looking at whatever is happening for the day you're trying to focus does this actually could impact future guidance in the future. So that's the whole goal like it does this data could impact policy in the future.

[00:16:00]That's why you know you start seeing moves like when it comes to central banks right and it comes to swing trades when you're focusing on this information this is what could lead to long-term direction because this is what actually causes the direction to lead long term because this is what actually impacts policy and that's why it's extremely important. All right. And then now we're we're heading to how to spot in uh how to spot it in sentiment or speeches, right? So when when a when a Fed speaker is talking or you're listening to a rate decision, right? The goal is to pay attention to the clues. How could you know is this hawkish or dovish? Right?

[00:16:46]Because I understand it. It's just a lot of noise, right? this headlines is going crazy left and right. How do I know what's important? The way you can determine what's important is you have to understand like okay well we we know that we have to focus on is it a hawkish comment or dovish comment. So when it comes to the clues is is this Fed speaker or is this speech saying that inflation remains too high? So if they're saying inflation is too high, we're concerned about inflation, right?

[00:17:18]That kind of gives you an idea. Well, if you're concerned about inflation, if inflation is too high, then that means that you should support rate hikes, right? So, that's where it gives you a hawkish clue. If they're saying key words like further tightening, uh, may be needed. So, when you hear further tightening, right, because sometimes they're not going to be black and white where it's going to be easy to to to dissect what they're saying. They're going to use key words that confuse the public. So further tightening, you know that oh tightening that's actually meaning that they're trying to make the access to money from banks, right, a lot harder. So if I hear that, then that means that they're looking to hike interest rates, right? So next is rates may stay restrictive. Restrictive, if they want to keep rates higher where where where it's at or keep rates higher, you hear restrictive, that's more of a hawkish clue. And then uh yeah, like policy remain uh vigilant, right? So if they're not trying to make any changes depending on where they are when it comes to their policy, but if they're not likely to hike uh cut interest rates that, oh, we're going to leave rates where the where they're at, that's going to give you an idea like, okay, this is like a hawkish pause. So these cues is what's extremely important because again, when it comes to the central banks, right, they're not going to tell you exactly what you want to hear. they're not going to be exactly black and white. So, this is going to be extremely important. Now, when it comes to dovish cues, uh disinflation is progressing, right? So, if they're saying that, oh yeah, like we're seeing inflation is actually lowering. We're seeing inflation is likely to hit its target, that is going to give you a clue. Or if they're saying growth risk is rising. If we're getting recessionary fears, the way they combat that is by cutting interest rates because they don't want your economy to go into a recession. So if you hear like if we see economic data like GDP or PMI uh whatever else you guys could think yeah GDP PMI like if we see that those numbers are extremely bad and it causes growth fears. This is exactly where a dovish policy would would actually help out. Okay. So now also policies uh uh uh if they're they're seeing that policy is too restrictive pretty much if we see that they're not trying to stay restrictive they're likely to start cutting interest rates and uh if we hear a little comment saying that easing can be considered right so obviously when it comes to these tones like they're not going to exactly say it this way but it it's just like understand just understand the the clues Right? Because if you're trying to trade a rate decision by yourself, it's going to sound a little similar to what I just showed you guys there. Sometimes it's going to be exact, right? But it's going to be similar. And that's how you're going to be able to determine if this rate uh if the central bank is hawkish or dovish, right? So, what matters the most? You're going to want to focus on the press conference like when we hear that Jerome Powell is about to speak, right? Or or chairperson.

[00:20:29]The dot plot. The dot plot is extremely important because this is what gives you the projections of what each central bank member is predicting where interest rates is going to go by the end of that year. So that's why it's important and you could tell if a central bank member is if they're looking towards rate cuts in the next few years or they looking at rate hikes. So dot plots is always important or projections. The vote the voting split matters extre is extremely important as well because when they do a voting split it shows you what each central bank member is expecting rate hikes or rate cuts or to pause interest rates. So, if the majority of members like uh say if they left rates the same today and then the majority of the members voted for a hike, then that could cause a hawkish reaction, right?

[00:21:23]Because that's showing us that well, majority of the members are expecting more of a hawkish bias, right? So, the vote split matters too. And then what also matters is the changes from from uh the previous meeting. So what that means is like usually you get a statement right and a statement from last time uh there was a rate decision could be a lot different from today's meeting like an example in a statement last like last rate decision could say uh we was expect like we're expecting inflation to actually start cooling right and then uh the the rate decision for today they could use that same line and say we're not expecting inflation to cool now we're expecting expecting inflation to actually rise. So the change of those statements is what actually lead to tradable opportunities as well. So just understand like read the language like that's one of the things that they're saying is like when you're looking at rate decisions uh you have to understand the language, right? Because one sentence could change the whole entire market's reaction. That's why it's extremely important to understand all of this stuff and why it matters. And now we're heading to data. And and again guys, all of this is live uh recorded.

[00:22:33]So you could just pause the video and just rewind, you know, just in case if if I'm going too fast.

[00:22:42]So what data supports hawkish or dovish bias? This is extremely important, right? Because most people are just trading data randomly and not knowing, oh, is this data going to actually impact monetary policy, right? So each type of release and the surprise versus expectations shape the policy bias.

[00:23:03]So we kind of have two signals right hawkish data and dovish data and these are the data prints that actually that can actually cause an impact. So when it comes to inflation, it's going to be P p uh CPI or PCE, right? So if inflation is higher than expected, this is what supports a hawkish data signal, right? Higher inflation, expect a hawkish reaction. If we get inflation coming in lower than expected, that's where we get a dovish data signal. Okay? So if inflation is hotter, expect the currency to gain strength. If inflation is lower, expect the currency to get weaker. If inflation is higher, expect that equity market for whatever currency country that is to get weaker, right? If that inflation print is higher, uh if it if sorry, if that inflation print is weaker, that dovish reaction, expect the equity markets to gain strength. All right? So, the markets is is always going to move in this p uh predicament, right? Based off of hawkish or dovish bias. Then there's job data.

[00:24:13]Same scenario. If we get strong labor data, this is what supports a hawkish bias. Weaker da labor data supports a dovish uh dovish bias, right? So just remember to remember these ideas. Same thing when it comes to growth. When growth is higher than expected, strong growth because higher growth supports higher inflation. It is it also supports strong job growth, right? So that can support a hawkish bias which weaker growth it does the opposite dovish reaction because if the growth is bad it is most likely because labor data is doing really bad and then growth is most likely going to follow that. So that's where you get a doubish bias. So even when it comes to like consumer spending, same idea, right? If the consumer spending is hot, that is inflationary, right? So that causes a hawkish bias. If in uh consumer spending is actually bad, that's a dovish bias, right? And then now the central bank communications.

[00:25:17]Officials warn inflation is still a problem. If they're if any central bank speaker is speaking for the day, you want to focus on those two tones, right?

[00:25:26]if they're concerned about inflation rising, if they want to hike interest rates, or if they're saying that inflation is lowering and then they're open to easing uh interest rates. So, you always want to focus on those two things when we have central banks coming out.

[00:25:42]Now, we on to the next one. So, when the data comes out like very simple, right?

[00:25:47]So when you're focusing on the data, a hawkish outcome, usually if you're looking at inflation, PCE, you want it to be above the forecast, right? You want to see that the tone is supporting sticky or higher inflation.

[00:26:04]Uh if the inflation data comes in like close to the forecast or no major change, then you don't have an edge, right? If the inflation data comes out lower or below the forecast, right, clear signs of cooling inflation, that's when you get a dovish bias. And this is extremely important because when you're looking at economic data, you have to put yourself in a central bank member shoes. If you are a central bank member and you see this data come out, would you be a hawk would you have a hawkish bias or a dovish bias? So when you could put yourself in that position, right, this is what could actually help you take a trade, right? Because if I see that inflation is way high, it comes out higher than expected. If I was a Fed member, I would kind of say, well, like inflation is is rising and we need to control inflation. So that would make me a hawkish bias. And this is where you would see the dollar rise, equities push lower. All right. So the same thing for NFP. When NFP comes out, you want to uh make sure Sorry, one sec, guys.

[00:27:16]So, if NFP or jobs, we're going to get that next uh next week. So, if if those if those numbers come out, you you want to make sure that the labor data comes out higher than expected. If we get strong data like this, that's what's really going to support uh a hawkish bias. So, if NF and uh the same thing is for the opposite. If we get uh payrolls and if NFP or job data come out worse or weaker than expected, that's when we're going to start expecting a dovish bias. So very simple.

[00:27:47]And then near expectations because how you know if it's mixed if the data comes out as expected or if you're looking at the data and you're like, well, I can't really pick out a bias, right? It's no actual change. So if you're confused when it comes to the data, then that means you shouldn't be taking a trade.

[00:28:05]It's very as simple as that. Like you you shouldn't you literally shouldn't take a trade because you should be able to look at it and actually confirm if you're going to hike or you're going to see a dovish reaction. Okay. Uh when it also comes down to GDP and PMI, it's the same scenario. If we see that GDP comes out stronger than expected, hawkish outcome. If it's dovish, right, we're expecting GDP or PMI data, retail sales to actually come out lower than expected. So this is how you can determine if when you're trading economic data, right, how this data could impact a hawkish outcome or a dovish outcome. And a and a perfect example is is what happened today. It's the like the best example. Okay. So uh I think that's it guys. Yeah, like I said, it's not so long. So I just want to do this for you guys. I'm gonna do this guy do this for you guys like every other day. If I could do it every day, I'll make sure that I'm gonna go through all the fundamentals so you guys could be up to speed and just make it quick to the point so that you guys could really understand it. But the goal for you guys is to write the notes down because eventually this is going to come back to the markets and it's going to be extremely important and you're going to want to be able to capitalize on it and don't me miss out on these opportunities. Like today was literally a perfect example of that. We had a dovish outcome, right? You can see right here, you see that today's data uh GDP came out lower, right? And then we saw that PCE came out lower. So this is what supported a dovish outcome. So when we look at a dovish outcome, that's where you're like, okay, this is what actually helps. Uh dollar often pushes lower, right? The yields push lower.

[00:29:48]Gold's gold pushes higher and then we saw that the stock index pushed higher and that was the reaction today. So, this is what could actually help you trade in the right direction. All right, guys. So, I hope this was helpful and I'll see you guys in the next video.