Article / 29 January 2015 at 14:00 GMT

American exceptionalism hits central bankers

Director / Accumen Management
United Kingdom
  • FOMC statement changes little
  • RBA likely to cut rates
  • More upside seen in USDCAD

By Ken Veksler

What a world we live and what a time to be alive!
Honestly... if you happen to be the citizen of a developed market economy, you’ve truly never had it this good – ever. Money is not only cheap, but basically free; it’s being thrown at you, practically being given away, all you need to do is sign on the dotted line and you’ll (at this rate) never have to pay interest again. 

Just keep the cash and when you fancy it, start giving some back... but remember, it's at your leisure and at no extra cost.

And once you have all that free cash, just think of everything you can do with it. The list is as long as my arm, but no matter which things you happen to choose, rest assured that you will be doing you, your fellow countrymen and global economy a great and valuable service. You will singlehandedly be responsible for the rapid global economic recovery which is just around the corner... apparently.

More importantly, if you happen to run a central bank in one these economies and you have your overnight cash rate set even remotely above 0%, you are quite simply a heretic and should revise the purpose of both your existence and your rate-setting policy immediately. 

(Not if your name is Janet, though, in which case, all is forgiven and could you please hurry up and raise rates?)

If you can somehow locate the mild overtones of facetiousness in the above, then we’re on the same page.

Yes folks, the only way to reignite the recovery that apparently we’ve been experiencing for the last four or five years is to have monetary policy set at such expansionary levels that it verges on dam-busting. 

But, and here’s the important caveat, you must not be expansionary for any longer if you’re the United States of America. No, if you’re Janet you must raise rates and do so immediately, otherwise the Austrian economists have won and how else will the world know that things are indeed improving?

Farcical, all of it.

Speaking of Janet, she and her cohorts last night delivered the latest Federal Open Market Committee decision and statement. As was widely expected, no change in policy was announced and the language utilised in the statement was little (if at all) changed from the previous iteration. 

Overall, a "steady as she goes" approach from the Fed, and one which the market broadly interpreted to mean that the Fed Funds rates are set to rise (as anticipated) somewhere between June and September of this year. More USD buying ensued, while the SPX didn’t really like the smell of what was in the air.

The main market player that proved due shellacking was the AUD, which, buried under mounting piles of market narrative alluding to an imminent Reserve Bank of Australia rate cut next week, took it it from both sides.

Frankly, Mr. Stevens, please read the above and revise your policy accordingly. The global recovery relies on you to do your bit. And no, it doesn’t matter whether it suits your economy (as unique as it may be) – this is simply your civic duty as a global citizen.

Anyway, enough. You all know that I don’t believe the RBA should cut rates, but that doesn’t mean they won’t. We’ll simply have to wait until next week to find out what they do.

Otherwise, the market is still in a pinball frame of mind as global yields in peripheral and central economies fall throughout the curve and currencies are left to decipher the underlying meaning of it all. The EURUSD (or at least its traders) are looking at Greece and wondering whether to bother, while keeping one eye on the Fed for a hint of when those rates are headed higher.

The Cable looks soggy and has room lower before a triumphant return to more respectable levels. For good orders sake, Betty needs to consolidate between 1.4800 and 1.5000 for a time before she heads higher in the second half of this year, back into the 1.5500/1.6000 area.

USDJPY is looking heavy and only further BoJ policy announcements will curtail the pair's fall from the 115.50/80 area to wipe out complacent longs and settle somewhere within the confines of 112.00/114.00 for its own brand of consolidation.

The USDCAD, not unlike the AUD, is being hit from all sides. Much softer commodity and energy complexes, a dovish central bank and hawkish perception of US rates have all fiven the loonie a beating. It’s come a long way already and while it does need to consolidate, it certainly looks like it’s set to head even higher if the current environment persists (which by all accounts it will).

It’s been a hell of a month and it’s only just coming to an end now. I effectively sit flat (save for some near-worthless AUDUSD upside expiring next week) and will take the weekend to consider what's actually going on out there and put my game face on for February.

In the meantime folks, as always, helmets on and good luck out there today.

-- By Michael McKenna

Ken Veksler is director of Accumen Management — click here to read more of his articles on


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