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Other Central Banks Preempt The ECB, Federal Reserve

“The Swiss franc has soared against the euro after the nation’s central bank shocked markets by abandoning a ceiling (alt) it put in place more than three years ago…Almost immediately, the Swiss currency surged as much as 39 percent against both the euro and the dollar…The move comes exactly a week before the [ECB] is expected to embark on a full-blown sovereign bond buying programme, which would precipitate massive demand for the Swiss franc, widely seen as one of global markets’ safest havens.”  Here’s something else to consider: “Switzerland is home to the world’s biggest oil trading intermediaries, all of whom generate revenues in dollars, all of whom pay…in Swiss francs, and most of whom have a mix of US dollar liabilities and Swiss ones.  What’s the easiest way to get the best Swiss rate?  Swap your overvalued but diminished supply of dollars into euros, and then recycle them directly into as many Swiss francs as you can.”  Therefore, the decision to abandon the artificially low exchange rate = Switzerland passing on bailing out “the world’s oil/commodity value losses.”  Meanwhile, Indian “stocks, bonds and the rupee surged after Governor Raghuram Rajan lowered the repurchase rate to 7.75 percent from 8 percent, the first reduction in 20 months.  The move set India apart from BRIC counterparts Russia and Brazil, which have boosted rates after currency declines that spurred inflation.”  Some argue that the move wasn’t a surprise, “given the oil-driven fall in inflation across the region…The decline in oil has opened a window for central banks to take action, easing monetary policy to spur consumer demand and business investment.  Most analysts don’t think the Reserve Bank of India is done cutting and expect further easing from central banks in China and South Korea.”  Meanwhile, “Russia’s central bank replaced its head of monetary policy on Wednesday following criticism over the bank’s failure to stop Putin from invading other countries halt the rouble’s sharp decline late last year.”

 

USA: 158 Years Signal US Expansion To Last Until Yellen Stops It

“In total, 85 percent of recessions over the last 158 years were associated with short-term interest rates moving higher than longer-term rates, a so-called inversion of the yield curve…Still, other recessionary canaries aren’t tweeting…The ratio of corporate profits to bond yields tend to peak two years before a business cycle, growth in narrow money supply typically turns negative a year before and credit markets often weaken in the final six months of expansion.  Consumer confidence and jobless claims slide as the economy slips into recession.  ‘All of these indicators appear healthy at the moment.’”

 

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