Saturday January 30, 2016 - 11:33:59 GMT
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A Major Reset Of Central Bank Policies
John M. Bland, MBA, CTA
Fed Policy "Reset"
After a couple of days to digest the Fed statement on Wednesday, there is no doubt in my mind that the central bank has "reset" its policy. Some say equity markets were unhappy that the Fed did not clearly signal a policy easing. What they did was to leave their options open for March, which makes a lot of sense. Personally I see little chance for action until data start to see a clear improvement. By data, my focus is on manufacturing. They can't tighten when this sector of the national economy is in recession. They are behind the curve and their best course of action now is to do nothing.
Bank of Japan Surprise
The BOJ's policy board shocked the markets Friday when it decided by a narrow 5-4 vote to charge a 0.10% interest rate on a portion of current account deposits that financial institutions hold with it. This was completely unexpected. Markets are still sorting out the BOJ policy move. At one point last week, Tokyo had leaked out that there would be a policy easing, but then later seemingly it pulled that back. Finally they announced all out stimulus to include negative interest rates on certain bank funds left with the BOJ. I think there were a lot of politics involved in this decision with "Abenomics" recently increasingly under attack because it has not been working quickly enough to produce economic growth. Bottom- line, traders have been walking away with a message from major central banks, especially the Eurozone and Japan, that the global economy is worse off that they thought. So it all boils down to perceptions about whether this additional ease will work. Confidence is not high.
WEEKLY HIGH IMPACT NEWS:
All Day- Mfg PMI's
13:30 US- Personal Income
13:30 US- PCE deflator
03:30 AU- RBA Decision
08:55 DE- Unemployment
All Day- Service PMIs
13:15 US- ADP Jobs
15:30 US- Crude
12:00 UK- Bank of England Decision
13:30 US- Jobless Claims
13:30 US/CA- Employment
13:30 US/CA Trade
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
John M. Bland
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