Sunday, November 29, 2015

Swiss tourism sector lobbying for a new CHF cap at 1.1500 vs EUR

9:40 PM    

Bloomberg with the story quoting from an article in today's Schweiz am Sonntag

The president of Grisons mountain railways, Sylvia Schmid, said:
"We've grown convinced that there needs to be a cap of 1.15 francs per euro"
Not a major lobby given that tourism contributes less than 3% to Swiss GDP but the idea may catch on
The article also reports comments from a banking executive saying the industry is worried that the SNB will further lower depo rate from -0.75% currently, which could mean the charge gets passed to savers
The article also cites an unidentified former SNB governing board member as saying he's afraid that president Jordan could be pushed out of office
EURCHF Friday saw some SNB more intervention to weaken the franc ahead of the ECB meeting next Thursday suggesting they fear/know some bearish euro measures coming. USDCHF and EURCHF were pushed through 1.0320 and 1.0925 in a rush.
Last week I reported comments from Jordan saying that  negative interest rates "have proved very useful" and stating that the SNB balance sheet shows they have been active in the market as I have often pointed out on these pages
Thomas Jordan - Are his days as SNB president numbered?
Read More

Monday, November 23, 2015

Currency Update 23rd of November

6:16 PM    
Monday, Novembercurrency-update 23rd, 2015 by 
We do not plan to enter any new positions until we assess the outcome of the Fed’s unscheduled meeting during the NY session. Start your week off on the right foot by reading my currency update below. 

Currency Update:

USD: The market currently prices a 72% probability for a Fed rate hike on December 16. The Fed have clearly signalled they are ready to commence the tightening cycle in December and the only information that is likely to prevent them from doing so is a move lower in underlying inflation between now and the December meeting, or some major uncertainty in financial markets. The employment situation has met the Fed’s criteria to lift rates, however they must also be confident that inflation is trending back towards 2%. Core PCE is at 1.3% and Core CPI is at 1.9%. The employment release for October, released November 6, came in much better than expected across all three major components which increased expectations for a December move. The FOMC statement and related minutes for the October meeting were hawkish and showed that the majority of Fed members see conditions likely warrant a rate rise at the next meeting.
EUR: The ECB have told markets they intend to re-examine QE at the December 3 meeting in light of subdued inflation. This suggests they will increase the size of QE and cut the deposit rate, with the market already pricing in a 10 basis point cut. An exclusive Reuters interview with four anonymous governing council members suggests that the ECB is likely to cut the deposit rate by at least 10 basis points in December.
GBP: Sterling remains a strong currency in the long term, however the recent Quarterly Inflation Report prompted the market to push back the timing of the first rate hike due the the BOE admitting that inflation is likely to remain subdued for longer then previously anticipated. CPI inflation is now expected to remain below 1% until the second half of 2016. Wage growth however has been excellent near 3% for several months, which is supportive for GBP.
AUD: The Australian dollar is a neutral currency while the RBA remain on hold. The central bank is unlikely to cut interest rates until they see Q4 inflation data, which is not released until January 27. The RBA will remain on hold in February if inflation is not of concern. The employment situation has been excellent with the October figure showing a gain of nearly 60,000 jobs and the unemployment rate moving down to 5.9%.
NZD: The RBNZ is likely to cut rates again in the medium term, with the market pricing a nearly 50% chance of a cut on December 9. Dairy prices have declined the the past two months, and third quarter data for both employment and inflation were much worse than expected.
CAD: The Canadian dollar is relatively neutral at present both fundamentally and sentiment-wise. There remains a possibility that the BOC will cut rates in 2016, however in the medium term, CAD direction will be a function of supply and demand of WTI.
JPY: The Japanese economy has failed to show any meaningful signs on recovery since the massive QQE program was implemented. The BOJ are watching CPI excluding food & energy to gauge underlying inflation trend. If underlying inflation does not pick up then the BOJ may have to increase the size of its QQE program yet again. Japan showed a technical recession with Q2 and Q3 GDP in contraction.
CHF: The franc is fundamentally a weak currency given the SNB’s negative interest rates, however it can suddenly rally on safe-haven flows. The SNB regularly recite that the franc is overvalued and they are prepared to intervene to weaken the currency. The franc’s direction is difficult to predict due to regular intervention by the SNB. With the ECB planning further QE and a rate cut, we will likely see an adjustment of monetary policy from the SNB on December 10, to compensate for whatever action the ECB may have announced one week prior, in an attempt to raise the EURCHF exchange rate.

Read More

Doves in Euro, Hawks in US

5:59 PM    


On Friday, euro came under pressure as European Central Bank (ECB) President Mario Draghi reiterated to the markets that the ECB is ready to extend the current asset purchasing program. The euro was down 0.42% at $1.0688 against the dollar following the speech, falling under the weight of Draghi’s words.
It was the second dovish speech in a week for Draghi, who continues to hint that a ramping-up of the ECB’s trillion-euro asset purchase program could be announced in December.
According to the minutes of the meeting, the risk of growth-sapping deflation has increased since the ECB’s projections in September and the central bank is anticipating that the inflation rate will take longer to move back to its 2 percent target.
“The impact of external factors and heightened uncertainty raised the possibility that the ECB’s measures, despite their magnitude, might not be gaining sufficient traction in the present environment to achieve their ultimate objective in terms of inflation rates,” the minutes stated.
Meanwhile, the Bank of Japan (BOJ) maintained its current pace of monetary stimulus, hoping that an economic recovery is in sight despite soft domestic capital expenditure and challenging global business conditions.
A vote of 8-1 was made in the wake of Thursday’s data showing exports in October fell for the first time in more than a year, stoking worries the world’s third-largest economy may struggle to recover from a recession.
As widely expected, the BOJ reiterated its pledge to increase base money, or cash and deposits at the central bank, at an annual pace of 80 trillion yen ($650 billion) through purchases of government bonds and risky assets.
Last week’s FOMC meetings minutes showed a solid core of Federal Reserve officials were in favor behind a possible December rate hike. Markets are currently pricing in a 70% chance of a rate hike in December, but the concern for markets now is how quickly the Fed will administer subsequent rate increases.
These minutes validate the rather hawkish tone we inferred from the October Fed statement and Chair Janet Yellen’s subsequent comments before Congress.  Barring any unanticipated market shocks, the FOMC has essentially locked itself into a December hike.
Top News This Week
USD: Prelim GDP q/q. Tuesday 24th November, 9.30pm.I expect figures to come in at 1.8% (previous figure was 1.5%).
USD: Core Durable Goods Orders m/m. Wednesday 25th November, 9.30pm.         
I expect figures to come in at 0.4% (previous figure was -0.3%).
Read More

Eurozone data shows why the ECB may skip additional QE in December

5:44 PM    

Improvement in the manufacturing and services sectors could see Draghi holding back on extra QE

Manufacturing rose at the fastest rate since May 2011. Employment, new orders, and backlogs also posted their strongest month for four and a half years
Services are at a 54 month high, the composite output index is at a 54 month high and manufacturing is at a 19 month high
This is the sort of data the ECB wants to be seeing for signs that a recovery is in place and that QE is doing its job of stimulating the economy. It's also a big reason why they needn't add any extra to it
The ECB has only one mandate, price stability. That's it. There's no full employment mandate, there's no economic growth targets, it's inflation "at, or near 2%"
Whether QE is directly responsible for the pick up in Europe will always be debatable but pick up we are, and QE will get the plaudits. What the ECB will be hoping for is that QE also brings an increase in inflation via the pick up in economic activity leading to wage and price gains. So far that pick up in prices is non-existent or is being trumped by prices dancing to the oil price tune 
That's why extra QE isn't a sure thing at the Dec ECB meeting. The ECB minutes showed that they wanted to assess more data and this data potentially pushes additional QE further off the table. At the moment the main direction of attack for inflation is via the currency, and cutting rates further looks to be the best tool for the job
My thoughts are that the ECB will cut rates but won't do any extra QE. They'll go to town talking about it and that will be enough to keep the euro bulls at bay for a while longer. The fight the ECB potentially has now is remaining dovish while the economy improves further. If we start to see a broad pick up in the economy then the market will soon switch to thinking about the end or tapering of QE, and then ECB will have a very tough job keeping the euro down
Draghi holds all the cards but he may leave one ace up his sleeve
Read More

Friday, November 20, 2015

More from the order boards 20 November

4:57 PM    

Here's today's latest news on the usual key pairs

USDCHF currently 1.0140 still underpinned by potential SNB action but weighed by EURCHF supply again
Sellers  1.0170 1.0200 1.0230 1.0250 1.0275 1.0300 1.0330 1.0350
Buyers 1.0120 1.0100 1.0080 1.0050 1.0025-30 1.0000
EURCHF currently 1.0835 near session lows post-Draghi. Ditto above re SNB
Sellers 1.0900 1.0930 1.0950 1.0975-80 1.1000 1.1025-30 1.1050
Buyers 1.0860 1.0830-35 1.0800 1.0775-80 1.0750 1.0730 1.0700
USDCAD currently lower at 1.3307 in retreat but with 1.3280 again providing good support
Sellers  1.3330 1.3350 1.3375 1.3400 1.3430 1.3450 
Buyers  1.3300 1.3280-85  1.3260 1.3240-45 1.3225 1.3200 1.3180 1.3140 1.3100
NZDUSD currently 0.6570 after dip from 0.6600 but supported into 0.6550
Sellers  0.6580-85 0.6600 0.6630 0.6650
Buyers  0.6550 0.6500 0.6470 0.6450 0.6430 0.6400
Read More

October 2015 UK PSNB 7.5bn vs 5.3bn exp m/m

4:55 PM    

Details of the October 2015 UK Public sector net borrowing data report 20 November 2015

  • Prior 8.6bn. Revised to 8.3bn
  • PSNB- ex-financials 8.2bn vs 6.0bn exp. Prior 9.4bn. Revised to 9.1bn
  • PSNCR -4.0bn vs +17.9bn prior. Revised to +15.4bn
  • Central government NCR -0.1bn vs +21.5bn prior. Revised to +21.6bn
Government spending was higher than income this month but revenues from income tax and VAT were up 3.4% & 2.0% respectively y/y. Corp taxes fell 1.1%
On the main numbers, it's the worst deficit since 2009. Georgie boy will be facing some stiff questions after this. Most of the borrowing went to cover health, education and defence
Government now owes £1.5tn to the private sector or 80.5% of GDP
The Chancellor had better hope that he starts getting some increased taxes from all the wage rises ;-)
Read More

Thursday, November 19, 2015

AUDUSD orders 19 Nov

4:54 PM    

  

Currently 0.7175 after finding support into 0.7150 but offers nearby

Offers: 0.7180-85 0.7200 0.7220 0.7250 0.7275-80 0.7300
Bids: 0.7150 0.7120-25 0.7100 0.7085 0.7065 0.7050
Read More

Switzerland trade balance Oct +CHF 4.16bln vs +3.52bln prev

2:39 PM    

Latest data now out

  • prev revised up from +CHF 3.05bln
  • exports mm +5.4% vs +2.3% prev revised up from +0.2%
  • imports mm +3.5% vs +2.6% prev
  • watch exports fall 13.2% yy real terms to CHF 2bln
Not a price changer but welcome news for the Swiss as CHF weakens over the period
SNB will still be on high alert but any smoothing they've been doing, and which I've often mentioned, is having some impact
Fall in watch exports reflects more on global economic weakness
USDCHF currently 1.0165 and EURCHF 1.0867 both looking underpinned still
Read More

Japan's Abe says GDP decline is due to a drop in inventory investment

2:01 PM    

Japanese PM's spokesman Kawamura speaking at the APEC meeting

  • Abe told the meeting he sees downside risk to global growth
  • stressed need for quality growth
  • TPP creates a new economic order
  • Abe says Japan close to ending deflation
A mix of caution and optimism sees USDJPY unfazed at 123.28 still
Abe- the future's not that bright but he's still wearing shades
Read More

BOJ's Kuroda says economy continues to improve moderately

1:56 PM    

BOJ boss with his usual post-announcement presser just underway

  • inflation expectations appear to be rising on the whole
  • will check risks and adjust policy as needed
  • BOJ easing is having intended effects
  • expect CPI to reach 2% target H2 2016
  • GDP data showed final demand is rising
  • Q3 contraction largely due to decline in inventory investment
  • new wording on price expectations reflects weak data
  • no need to change view that price expectations are rising
  • effect of Paris attack on global economy is limited
The snoozefest begins. One day he'll prove me wrong and say something worthwhile
We can but hope
Meanwhile USDJPY is nudging back above 123.30 again on general USD demand but tempered by cross pair supply.
Read More
Subscribe to: Comments (Atom)