Five things to note on payroll day

1.   The BOE kitchen sinks it.   Well, Carney evidently felt obliged to make up for lost time, as the Old Lady unveiled a "comprehensive package of measures" to ward off the economic impact of the Brexit.   And look, it's worked:  the BOE doesn't even forecast a recession for the UK.  (This, of course, is akin to grading your own exams at school; naturally you're going to give yourself an A!)  The market reaction was fairly predictable, with sterling and Gilt yields tumbling while the FTSE did a ripper.  While the decision to purchase corporate bonds was an interesting twist, as many have observed that GBP 10 bio over the next year and a half or so pales in comparison to the EUR 10 bio that the ECB purchases per month.   (Admittedly, the UK market is pretty small at GBP 150 billion of eligible securities, so that's still a decent chunk.)

While Carney admitted in the press conference that there likely would be a level for sterling that would curb the BOE's impulse to do more easing, that the majority of the committee envisages taking rates lower suggests that we aren't particularly close to it yet.

Perhaps the cleverest thing that the BOE did was to exclude central bank reserves from the leverage ratio calculation of UK banks.   This should help ensure that there is no crowding out of private sector activity from the accumulation of reserves thanks to the various purchase and lending programs.  Indeed, carney was quite vocal that he expects banks to pass on this rate cut in full.

While Macro Man sticks to his view that monetary policy will not be not a particularly potent driver for sterling in the medium term, the very least you can say about yesterday's package of measures is that they offered little cause for a short squeeze.   The trend remains down.

2.  Will the policy be effective?   A 25 bp improvement in outstanding mortgage and business loan rates will be a windfall for borrowers, though it remains to be seen whether it will entice more fresh demand for credit.   After all, the evidence from the rest of the world is generally pretty ample that the price of money is not the biggest impediment to borrowing activity.   Macro Man had to laugh when he saw that the Bank had done QE to help move Gilt yields in a way that would spur economic activity.    Ummm....if the past few months haven't done it, what's 60 billion quid of purchases going to do?

3.   At least Carney talked sense on negative interest rates.    He couldn't have been more...well...negative on the idea.  Of course, the MPC is theoretically a democracy, so Carney perhaps didn't have the right to speak for the committee as a whole.   Then again, it's the Governor who submits the policy proposal for a vote within the MPC, so Carney can ensure that NIRP doesn't even get a look-in.   Macro Man giggled a bit to himself when Bloomberg TV trotted out Adam Posen, who bemoaned the lack of NIRP  and claimed that it would work better than in Italy or Japan.   This was the equivalent of saying that pork scratchings confer greater nutritional benefits than deep fried Mars bars.

4. Macro Man's payroll model is bearish...again.  Although many of the constituent indicators improved this month, a few did not; in any case, several key inputs remain at levels consistent with very tepid job growth, despite the low level of claims.   This month the model looks for private sector job gains of 118k, well below the consensus reading of 170k or so.  Last month's model forecast miss was the largest since November of 2009; previous large misses have generally seen a surprise (relative to the model) in the other direction the following month, which would actually suggest downside risk to the forecast.  Macro Man isn't quite prepared to take that at face value, but would definitely take the "under" versus the consensus forecast.

5.  Macro Man is on holiday next week.   This is possibly the most important piece of information that he can give you.   Let's take a brief tour of some of Macro Man's previous holidays:

- August 2007:  The start of the financial crisis as money markets erupt and quant models everywhere implode.

- August 2008: Russia invades Georgia, and the EUR reaches a top/USD reaches a low

- September 2008: TARP is announced as Macro Man is enjoying a cheeky long weekend in Madrid

- July 2011: Italy becomes embroiled in what had heretofore been a crisis focused on Greece, Portugal, and Ireland

- August 2015:   Remember that Chinese kerfuffle a year ago?

Boone chance a tout, and if anything crazy happens Macro Man may offer the odd thought or two....