Dovish
Pro-stimulus stance that weakens currencies and lifts stock markets
Definition
Dovish refers to a central bank policy stance that favors lower interest rates and looser monetary policy to stimulate economic growth and employment. A dovish central bank prioritizes employment and growth over inflation control. Dovish signals typically weaken a currency (lower rates make it less attractive to capital), reduce bond yields, and support stock prices (lower discount rates increase present value of future earnings). The term comes from the "dove" — a symbol of peace, representing a softer policy approach.
Example
When the Federal Reserve signaled rate cuts in late 2023, markets interpreted this as dovish — the rate hiking cycle was over. The S&P 500 rallied 15% in the final weeks of the year, gold rose strongly, and the U.S. dollar weakened against most currencies. Iron condor traders saw implied volatility compress as the "Fed fear" dissipated.
Related Terms
Frequently Asked Question
What does dovish mean?
Dovish means a central bank prefers lower interest rates to stimulate growth. Dovish Fed signals weaken the dollar, lower bond yields, and often boost stock prices by reducing the discount rate on future earnings.
APA Citation
Last updated:
· Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.