Here are the data points that the consensus narrative connects. The BIS encourages countries not to dawdle and remove accommodation when appropriate. The Bank of Canada indicated that after several quarters of strong economic expansion and robust labor market growth, it is time to re-think its monetary stance. 

In a close (5-3) vote, the Bank of England left rates on hold in June, and Governor Carney who had forcefully argued against raising rates seemed more open. It has removed some accommodation provided after last year’s referendum through raising the capital buffer. 

The ECB has been gradually evolving its risk assessment and forward guidance. The downside risks to growth have dissipated, it says, and the threat of deflation has been turned back. Many understood Draghi to have also indicated readiness to begin removing accommodation. There is a coordinated effort underway to take away the proverbial punch bowl.

Two major central banks meet in the week ahead. Both the Reserve Bank of Australia and Sweden’s Riksbank are likely to also tilt their neutral stance toward a little less accommodation. Through statement rather than deeds, the respective monetary authorities can downplay the likelihood that economic conditions will warrant further easing.  

This may have more market impact in Australia, where there are some lingering ideas that rates may still be cut, and the Australian dollar is trading at the upper end of a year-old trading range. In fact, as the first half ended, the Australian dollar is flirting with a trend line drawn off the April and November 2016 spike highs and the highs from March this year. It is found near $0.7725. 

The euro’s price action had traced out some kind of topping pattern against the Swedish krone. Whether it is a triple top or a head and shoulders pattern, the neckline ( ~SEK9.70) broke dramatically, and the initial target near SEK9.60 was approached before the weekend. It also corresponds to a 50% retracement of this year’s euro rally. The next target is in the SEK9.50-SEK9.55 area.  

Ironically, the only major central bank that the market is skeptical about seems to be the Federal Reserve. The troika of leaders (Yellen, Fischer, and Dudley) as well as a couple of regional Fed Presidents not only want to press ahead with the course, and added to their arguments a discussion about financial conditions and rich equity valuations. Depending on one’s assumptions, the Fed funds futures strip implies around a 15% chance of a hike in September and around a 45% chance of a hike.  

The story that is spun suggests that officials everywhere are telling investors that the gig is up, that peak QE is behind us and a new monetary cycle is at hand. We are skeptical and suspect that the narrative is getting ahead of itself. The Vice President of the ECB quickly tried to explain that Draghi was not announcing a change in policy.  

Draghi had, we thought, been clear that the preconditions of removing accommodation, namely a durable and sustainable increase of inflation, had still not been achieved. Even before last week’s comments, we anticipated that in September, the ECB would likely announce an extension of its asset purchases into the first half of 2018 albeit at a reduced pace. Draghi also seemed clear that he was opposed to lifting the deposit rate before the asset purchases were complete.