Concerted central bank collusion

Summary:  The world's central banks are seemingly united in panic as unsettling macroeconomic data continue to roll in, cancelling policy normalisation plans and retreating to a broadly dovish stance.


The European Central Bank threw in the towel on interest rate hikes in 2019. They joined the Federal Reserve, Bank of Canada, Reserve Bank of Australia, and Reserve Bank of New Zealand in blaming their dovish bias on variations of the “uncertainty around global growth and trade tensions” theme.

The 1985 Plaza Accord by finance ministers from France, Germany, Japan, the UK and the US, which led to a massive devaluation of the US was called “concerted intervention". This unified central bank dovish tilt sure smells like “concerted central bank collusion.”

The often-times explosive US nonfarm payrolls report was more firecracker than firestorm. The headline reporting a mere 20,000 gains certainly disappointed those looking for the consensus result of 180,000 jobs. However, the jump in average hourly earnings to 3.4% from 3.1% took the sting out of the data. Federal Reserve chair Jerome Powell said cross-currents and conflicting signals were affecting the Fed's near-term outlook. This morning’s employment report supports his cautious view, which explains the muted FX reaction to the data.

The Canadian employment report was more firestorm than firecracker, and its impact on USDCAD was underwhelming as well. Canada added 55,900 new jobs in February, well above the forecast for no gain or loss. USDCAD dove from 1.3450 to 1.3492 but rebounded to 1.3420 almost immediately. The Bank of Canada is less concerned about domestic employment than it is with household spending, oil markets and global trade policy. 

Wall Street traders were unhappy with global equity performance following China’s weak trade report. The NFP data didn’t change their outlook, although better than expected Housing Starts eased the sting. Housing Starts rose 18.6% in January (forecasts called for 9.9%).

The UK Brexit show may not be the only game in town next week, but it’s the one that will garner all the attention. MP’s will be channeling The Clash as they debate "Should I stay or should I go."
GBPUSD (four-hour, source: Saxo Bank)
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