The Sterling Digest, 31 January 2015: central bank drama

Davos cartoon posted on Twitter
The World Economic Forum. The time of year when central bankers like to surprise.

It’s been an incredible month. Our first trading month of 2015 is in the books and it did not lack for surprises and drama. Crashing oil prices kicked off volatile trading as the new year began. The Swiss National Bank got things going with their surprise abandonment of their currency peg to the euro and interest rate cut into negative territory. The Bank of Canada surprised markets too with its interest rate cut much sooner than markets expected. The European Central Bank also managed to surprise with a larger than expected quantitative easing package. The Federal Reserve surprised markets too but in the other direction. While it did not make any changes to monetary policy, the $FED remains hawkish following Yellen’s hawkish signals in December. Finally, the Bank of England turned seemingly dovish with its hawks relinquishing their call for interest rate hikes. The incredible drama series that was January certainly sets the stage for a new normal to emerge in 2015.

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