Where does Monetary Policy end and Manipulation Start

Yesterday I wrote about Central Bank credibility and the fact that as economic activity grows so will the influence of Central Banks.

I do not intend to repeat myself, but as traders we will now have both a fresh driver for the fundamental side of our strategy and will have to decide on the veracity of what we are hearing.

Central banks by their very nature have to be listened to and no matter how honest and/or truthful that are being, Central Bank Governors, Chairmen and Presidents will always influence the markets. In years gone by the likes of Alan Greenspan and Ben Bernanke, in particular had a lot to say about markets, regulation and rates but what they said was always what they genuinely believed. Greenspan for example may have eventually been castigated for his “irrational exuberance” speech but he didn’t make the speech just to “cool” the markets, they were his genuine beliefs.

I am not so sure we can pin such belief on what we hear nowadays but maybe, that is just that I am becoming more cynical about motives as I get older!

Next week we see how the ECB and FOMC fare, since they are both meeting. The FOMC will hike rates and Jay Powell will say the next hike will depend on the path of inflation but since they will have hiked twice with inflation benign, are they his genuine thoughts?

Mario Draghi will now be under pressure to mention the withdrawal of accommodation. If he does it will drive the euro significantly higher since it will be a major policy shift, but if he doesn’t, does that mean that he is still master of all he surveys or simply trying to “keep a lid” on the single currency to aid the weaker nations of the Eurozone?

Another proposal, another split

David Cameron has a great deal to answer for as he sits calmly in his huge house in the Country. His fears over the rise of UKIP led the UK to the brink of economic meltdown. Now he and the other main protagonist, Nigel Farage are nowhere to be seen and the campaign to leave the EU is one huge mess!

Since the vote on Brexit almost two years ago, it is impossible to imagine a single event being more poorly handled. The single most important piece of legislation in the past fifty years has been bungled, mishandled and simply a disaster.

Now, it seems, there is more to come. The longer Brexit goes on and there is no end in sight, the bigger fiasco it becomes.

Brussels isn’t prepared to provide any comfort at all, and, frankly, why should they? They have a strict set of guidelines to work to which is more can be said for the UK and will not deviate to accommodate them at all.

The Irish border has become the focal point of the entire issue and it is time to realize that, one way or another, something has to give. A hard border and the South veto an agreement and a hard Brexit follows, a soft border and the North withdraw support for the Government and an election follows.

So what? Elections now seem to be held every two years or so anyway.

Membership of the single market has now morphed into membership of the customs union. Are they the same? I am not sure, and I am not going to wade through mountains of web pages to find out.

The UK people voted to leave the EU most based on immigration which is one of the four pillars. Free movement of goods, capital, services and people cannot be picked or chosen, take all or take none. But did that get well enough explained to Brexiteers?

It’s too late to worry but it has taken two years to arrive……………nowhere!

Trump/Kim or Kim/Trump everything is in the detail

There is a song by the British rock band Queen in which there is a line “it’s finally happened”.

That song is ironically called I’m going slightly mad and sums up perfectly what is going to take place on Sentosa Island, Singapore next week.

Trump and Kim will meet. Is it a dream? How did two of the biggest egos in the world decide that they should have a chat and sort out their differences? Do they not realize that the whole point is that they should never meet? It is a bit like James Bond agreeing with Blofeld to meet up and try to agree that maybe Blofeld won’t take over the world.

Can they (Kim and Trump not Bond and Blofeld) ever come to any agreement. It is Brexit on a global scale! Kim won’t give up his nuclear programme or he just becomes another despot in a backwater despite the support of Beijing and Trump can’t really bomb North Korea unless Beijing agrees.

This then begs the question, why aren’t the talks tripartite in which President Xi at least attends one or two sessions?

Will the world change irrevocably next week? It’s doubtful, but without doubt both Kim and Trump will declare the talks a success since they cannot afford not to.

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