David Long

Central banks at it again!

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Forex Market News

Another Central Bank surprise overnight. They are getting good at making market professionals like I look like fools. Not one person predicted the BOC to drop rates by a quarter basis point to 0.75%. The Loonie jumped 200 pips on the news and has added another 100 since. 2015 is starting to become studded with over extended bars. Sounds like something Hemmes would do with Merivale in Sydney. Poloz added to the morose theme of the day after the BOJ in their meeting kept things as they were, but changed the timeline horizon. This was followed by the BOE, after two of the members who had been voting for a rate rise turned back to being dovish. Meanwhile Jordan from the SNB is in hiding with his colleagues in the Swiss Alps at Davos. At Davos, the topic of conversation is inflation, as outlined by these three central banks and their movements. And we haven’t even seen the ECB move yet, that is tonight!

So the Plonker Poloz is worried about inflation and is getting on the front foot by lowering rates. Not a bad idea, to be ahead of the curve, I like that. And you would have to agree that his concern from lower oil price would be deflationary to the Canadian economy. Whilst it is inflationary to Australia’s really. Perhaps he’s not such a plonker after all. Maybe he got a call from his old boss, the wily old mate Carney.

My concern is that the muppet Glenn-I’m six months behind the curve-Stevens will follow suit, and unnecessarily so. Our economy, whilst not going great guns, is not in the toilet. Lowering rates now would put us there. Even talking about it would. The talk and act of discussing lower rates fills me with dread because it gives business and expansionary concepts doubt about the future. Just when we do not need it. The economy is turning. The last rate cut was in Aug 2013, down to 2.5%, that was when the dollar was trading in the mid 90’s, we are now at 81. Rule of thumb is that for every 5 cent drop it is equal to 0.25% rate cut. So, effectively the rates have dropped by 0.5% anyway.  Our inflation is sitting at 2.3%, well inside the 2-3% range of the RBA. Our GDP is down but still strong at 2.7%. All in all we are well positioned and do NOT need to lower rates. Any talk of it is pure stupidity. But when dealing with Central Wankers who knows what we will get.

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