The BOE held true to consensus and kept rates unchanged and maintained its balance sheet at 435 billion pounds, with the votes were exactly the same as the August meeting. The POUND fell on the initial headlines but the algos reversed as it was reported that there MAY be a need to raise rates due to the lessening slack in the economy. Governor Carney is reading from the Mario Draghi book, “Rules For Central Bankers.” He cited Brexit as the cause of a supply shortage because of reduced investment into the U.K. Wow! This is nonsense as stagnant wages are limiting domestic demand but Carney insists the negative fallout is constraining supply. With interest rates at record lows British firms could borrow all the cash they need to finance expansion. Carney needs BREXIT as the cover for his massive error. Remember when he panicked and cut rates following the BREXIT vote?

In following the poor forecasting record of central banks, Carney’s economic downturn never came. In fact, the severely weakened POUND helped British exporters and the U.K. economy remains at full-employment. Rest assured Governor Carney will reach into his bag of tricks and pull out the counterfactual, “had we done nothing the U.K. economy would have gone into a steep decline.” So the end result was that the British pound rallied 1.5% in anticipation of the coming rate increase. The level of resistance I posted last night should correlate with the 200-day moving average on the euro/pound cross, which Thursday was 0.8701, and is currently trading at 0.8893. The euro/pound cross is DOWN 4.5% on the week. The madness of crowds, indeed.

***The Swiss National Bank also announced its interest rate intentions Thursday. I didn’t mention it last night because I deemed it irrelevant. As usual, the SNB failed to surprise as they stayed the course of expansionary monetary policy: Deposit rates stuck at -0.75%. The statement said: “The SNB will remain active in the foreign exchange market as necessary, while taking the overall currency situation into consideration.” The U.S. Treasury has yet to designate the SNB a currency manipulator, which provides cover for many other central banks to set their monetary policy based on their currency values. Further, the SNB is so brazen as it said:

“Since the last monetary policy assessment, the Swiss Franc has weakened against the EURO and APPRECIATED against the dollar. Overall, this development is helping to reduce, to some extent, the significant overvaluation of the currency. The Swiss franc nevertheless remains highly valued, and the situation on the foreign exchange market is still fragile. The negative interest rate and the SNB’s willingness to intervene in the foreign exchange market as necessary therefore remain essential in order to reduce the attractiveness of Swiss franc investments and thus pressure on the currency.”

No currency manipulation going on here. I will say it loud and clear: I AM NOT A GOLD BUG BUT I AM CERTAINLY NOT A FIAT CURRENCY BUG. The global financial system is fraught with central banks bent on the destruction of market signals and they HAVE NO EXIT FROM THE MASSIVE AMOUNT OF LIQUIDITY THEY HAVE CREATED. The FED will have to begin quantitative tightening (QT) in order to test the “PAINT DRY” theory of extrication. The SNB has always maintained their intervention was based on the EUR/CHF cross, but it is of more than passing interest in referencing the DOLLAR in Thursday’s release of its Monetary Policy Assessment. The EURO currency has GAINED 6% versus the Swiss year-to-date, and for the SNB it is not enough to affect its negative rate policy. Nah … 2+2=4. Maybe in some alternative universe.