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George Dorgan

George Dorgan

George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on SeekingAlpha.com and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.

Articles by George Dorgan

Swiss Trade Balance April 2017: Exports Stagnate

4 days ago

We do not like Purchasing Power or Real Effective Exchange Rate (REER) as measurement for currencies. For us, the trade balance decides if a currency is overvalued. Only the trade balance can express productivity gains, while the REER assumes constant productivity in comparison to trade partners.
Who has read Michael Pettis, knows that a rising trade surplus may also be caused by a higher savings rate while the trade partners decided to spend more. This is partially true.
Recently Europeans started to increase their savings rate, while Americans reduced it. This has led to a rising trade and current surplus for the Europeans.
But also to a massive Swiss trade surplus with the United States, that lifted Switzerland on the U.S. currency manipulation watch list.
To control the trade balance against this “savings effect”, economists may look at imports. When imports are rising at the same pace as GDP or consumption, then there is no such “savings effect”.
After the record trade surpluses, the Swiss economy may have turned around: consumption and imports are finally rising more than in 2015 and early 2016. In March the trade surplus got bigger again, still shy of the records in 2016.

Read More »

Weekly Speculative Positions (as of May 16): Yen and Aussie Bears Push Forward, while Sterling Bears Continue to Run for Cover

5 days ago

Swiss Franc
Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.
The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The
reverse carry trade in form of the Long CHF started and lasted – without some interruptions – until the peg introduction in September 2011.
In mid 2011, the long CHF trade became a proper carry trade – and not a reverse carry trade anymore – because investors thought that the SNB would hike rates earlier than the Fed.
CHF Speculative Positions
Last data as of May 16:
The net short CHF position has risen from 15.2 short to 21.1K contracts short (against USD).
But the major movement was that speculators are net long the euro now and not the dollar any more. This implies that they are also long Euro against CHF.

Speculative Positions
Choose Currency[embedded content]
source: Oanda

In the Commitment of Traders reporting week ending May 16, speculators in the futures market made three significant adjustments in the currency futures.
First, they continued to accumulate a large short yen position.

Read More »

FX Weekly Review, May 15-20: Swiss Franc recovering against EUR

6 days ago

Swiss Franc vs USD and EUR
The Swiss Franc recovered a lot of the losses that came with the French elections. That political event was mostly driven by speculators that will close their positions.
We expected the EUR to trade around 1.07 to 1.0750 CHF in some time. What exactly is this “some time” remains open, but is at the latest in early 2018.
Many, like Thomas Flury, currency strategist at UBS, think that the Swissie will weaken.  This is mostly based on the assumption that higher inflation will force the ECB to reduce their bond purchases. We do not agree; on the contrary we reckon that Euro zone inflation will fall to under 1% in the beginning of next year. See more in our weekly SNB interventions update.

EUR/CHF and USD/CHF, May 20(see more posts on EUR/CHF, USD/CHF, )The picture shows that FX traders went long EUR against CHF. Source: markets.ft.com – Click to enlarge
Swiss Franc Currency Index (3 years)
The Swiss Franc index is the trade-weighted currency performance (see the currency basket)On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 33% of the SNB portfolio and 25% of Swiss exports (incl. countries like China or Arab countries that use the dollar for exchanges).

Read More »

Weekly SNB Interventions and Speculative Positions: SNB interventions are rising again

11 days ago

Headlines Week May 15, 2017

The pro-European politician Macron has won the French elections. He is a politician that – similar to Hollande four years ago – promises economic improvements, more investment, more jobs.
As opposed to Hollande, he also advocates limitations on salaries and less social protection for workers, to restore France’s competitiveness.
Mostly probably he will fail – similar to his predecessor because the French economic reality is simply different.
His success moved the EUR/CHF up to 1.0980, mostly caused by FX speculators.
But serious investors – i.e. not FX speculators – did not follow the political event. The SNB had to intervene for 1.9 bn francs.
Serious investors are far more interested into monetary policy and not in politics. And there things remained clear for us: Draghi continues to be dovish, no ECB rate hike in sight.
And so the EUR/CHF must go down again.
 

Euro/Swiss Franc FX Cross Rate, May 15(see more posts on EUR/CHF, ) Source: markets.ft.com – Click to enlarge

SNB sight deposits
Swiss private investors do not export their massive trade surplus with purchases assets in foreign currency, apparently because valuations of stock markets are too high and bond rates are too low still.

Read More »

Swiss Producer and Import Price Index in April 2017: +0.8 YoY, -0.2 MoM

12 days ago

The Producer Price Index (PPI) or officially named “Producer and Import Price Index” describes the changes in prices for producers and importers. For us it is interesting because it is used in the formula for the Real Effective Exchange Rate. When producers and importers profit on lower price changes when compared to other countries, then the Swiss Franc reduces its overvaluation. The Swiss PPI values of -6% in 2015 (see below), compared to -3% in Europe or -1% in the U.S., diminished the overvaluation. In 2017, however, producer prices are rising again – in both Europe and Switzerland. See more in Is the Swiss Franc overvalued?
Producer and Import Price Index in April 2017
From the data release of Swiss Statistics:
Neuchâtel, 15.05.2017 (FSO) – The Producer and Import Price Index fell in April 2017 by 0.2% compared with the previous month, reaching 100.1 points (base December 2015 = 100). This decline is due in particular to lower prices for petroleum products and machinery. Compared with April 2016, the price level of the whole range of domestic and imported products rose by 0.8%. These are some of the findings from the Federal Statistical Office (FSO).

Switzerland Producer Price Index (PPI) YoY, April 2017(see more posts on Switzerland Producer Price Index, ) Source: investing.

Read More »

Weekly Speculative Positions (as of May 09): Significant Position Adjustment in the Currency Futures

12 days ago

Swiss Franc
Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.
The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The
reverse carry trade in form of the Long CHF started and lasted – without some interruptions – until the peg introduction in September 2011.
In mid 2011, the long CHF trade became a proper carry trade – and not a reverse carry trade anymore – because investors thought that the SNB would hike rates earlier than the Fed.
CHF Speculative Positions
Last data as of May 09:
The net short CHF position has fallen from 17.7 short to 15.2K contracts short (against USD).
But the major movement was that speculators are net long the euro now and not the dollar any more. This implies that they are also long Euro against CHF.

Speculative Positions
Choose Currency[embedded content]
source: Oanda

The Commitment of Traders reporting period ending May 9 was particularly active. In most weeks, there is often only a couple of significant adjustments to the speculative positioning. In this recent reporting period there were several.

Read More »

FX Weekly Review, May 08-13: Euro rises far above 1.09 CHF, for how long?

14 days ago

Swiss Franc
The Swiss franc was the weakest of the majors. Its 1.7% fall was the largest in six months. Over the past month, the euro has rallied strongly against the Swiss franc. The 3.2% rally has seen the euro reach heights not see since last September. Thanks to the win of the pro-euro Macro, FX traders went long Euro and short CHF. The euro rose up to 1.0980.
How long this momentum will last is still the question, given that  it is driven by this political event and sustained by SNB interventions.
That the momentum slowed was already visible on Friday when traders took profits: Both EUR/CHF and USD/CHF fell again.

EUR/CHF and USD/CHF during French electionsThe picture shows that FX traders went long EUR against CHF. At the end of the week they took profits. – Click to enlarge
Swiss Franc Currency Index (3 years)
The Swiss Franc index is the trade-weighted currency performance (see the currency basket)On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 33% of the SNB portfolio and 25% of Swiss exports (incl. countries like China or Arab countries that use the dollar for exchanges).

Contrary to popular believe, the CHF index gained only 1.73% in 2015. It lost 9.52% in 2014, when the dollar (and yuan) strongly improved.

Read More »

Weekly SNB Interventions and Speculative Positions: After French Elections

17 days ago

Headlines Week May 08, 2017

The centre-left politician Macron has won the French elections. He is a politician that – similar to Hollande four years ago – promises economic improvements, more investment, more jobs.
As opposed to Hollande, he also advocates limitations on salaries and less social protection for workers, to restore France’s competitiveness.
Mostly probably he will fail similar to his predecessor because the French economic reality is simply different.
His success moved the EUR/CHF up to 1.0960, mostly caused by FX speculators.
But serious investors – i.e. not FX speculators – did not follow the political event. The SNB had to intervene for 1.6 bn francs.
Serious investors are far more interested into monetary policy and not in politics. And there things remained clear: Draghi continues to be dovish, no ECB rate hike in sight.
And so the EUR/CHF must go down again.

Euro/Swiss Franc FX Cross Rate, May 08(see more posts on EUR/CHF, ) Source: Markets.ft.com – Click to enlarge

Eurozone Core Consumer Price Index has spiked up temporarily
The graph shows that the Core Consumer Price Index has spiked – for us temporarily.
Hence many investors also hoping that the ECB will start tapering.
But this is an illusion, given that oil prices are going down again and wage pressures are weak.

Read More »

Weekly SNB Interventions and Speculative Positions: Macron will Probably Win the French Elections

18 days ago

Headlines Week May 08, 2017

The centre-left politician Macron has won the French elections. He is a politician that – similar to Hollande four years ago – promises economic improvements, move investment, more jobs.
Mostly probably he will fail similar to his predecessor because the French economic reality is simply different.
His success moved the EUR/CHF up to 1.0865, mostly caused by FX speculators.
But serious investors – i.e. not FX speculators – did not follow the political event. The SNB had to intervene for 2.4 bn francs.
Serious investors are far more interested into monetary policy and not in politics. And there things remained clear: Draghi continues to be dovish, no ECB rate hike in sight.
And so the EUR/CHF must go down again.
 
Euro/Swiss Franc FX Cross Rate, May 08(see more posts on EUR/CHF, ) Source: Markets.ft.com – Click to enlarge

SNB sight deposits
Swiss private investors do not export their massive trade surplus with purchases assets in foreign currency, apparently because valuations of stock markets are too high and bond rates are too low still.
As consequence the SNB intervenes and takes the risk that private investors do not want. With this measure she either risks its bankruptcy or – over the long-term – she deviates from its mandate to avoid inflation.

Read More »

Weekly Speculative Positions (as of May 02): Euro Shorts Covered, Yen Longs Liquidated

19 days ago

Swiss Franc
Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.
The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The
reverse carry trade in form of the Long CHF started and lasted – without some interruptions – until the peg introduction in September 2011.
In mid 2011, the long CHF trade became a proper carry trade – and not a reverse carry trade anymore – because investors thought that the SNB would hike rates earlier than the Fed.
CHF Speculative Positions
Last data as of May 02:
The net short CHF position has risen to 17,7K contracts (against USD).

Speculative Positions
Choose Currency[embedded content]
source: Oanda

It was feast or famine in the adjustment of speculative positions in the currency futures market during the CFTC reporting period ending May 2. Speculators either made large adjustments or very small adjustments, and little in between.
Speculators covered 17.7k previously sold euro contracts to reduce the gross short position 161.1k contracts. It has been reduced by around 46k contracts over the last few weeks.

Read More »

FX Weekly Review, May 01 – 06: Seasonal Patterns and Yen Crosses

20 days ago

Swiss Franc Currency Index
The Swiss Franc index gained 1.5% in the last month, the biggest part of it is from the last week.

Trade-weighted index Swiss Franc, May 06(see more posts on Swiss Franc Index, ) Source: markets.ft.com – Click to enlarge
Swiss Franc Currency Index (3 years)
The Swiss Franc index is the trade-weighted currency performance (see the currency basket)On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 33% of the SNB portfolio and 25% of Swiss exports (incl. countries like China or Arab countries that use the dollar for exchanges).

Contrary to popular believe, the CHF index gained only 1.73% in 2015. It lost 9.52% in 2014, when the dollar (and yuan) strongly improved.

 

 

 

Swiss Franc Currency Index (3 years), May 06(see more posts on Swiss Franc Index, ) Source: Markets.ft.com – Click to enlarge

USD/CHF
It is difficult to talk about a weak US dollar when in recent days it has made new six-week highs against the yen, 14 month highs against the Canadian dollar, four-month highs against the Australian dollar, and five-month highs against the New Zealand dollar. It is at three-week highs against the Chinese yuan and near the upper end of its two-month range against the Mexican peso.

Read More »

Weekly SNB Interventions and Speculative Positions: Interventions despite Positive Outcome in France

24 days ago

Headlines Week May 03, 2017

The centre-left politician Macron has won the French elections. He is a politician that – similar to Hollande four years ago – promises economic improvements, move investment, more jobs.
Mostly probably he will fail similar to his predecessor because the French economic reality is simply different.
His success moved the EUR/CHF up to 1.0865, mostly caused by FX speculators.
However serious investors – i.e. not FX speculators – did not follow the political event. The SNB had to intervene for 2.4 bn francs.
Serious investors are far more interested into monetary policy and not in politics. And there things remained clear: Draghi continues to be dovish, no ECB rate hike in sight.
And so the EUR/CHF must go down again.

Euro/Swiss Franc FX Cross Rate, May 02(see more posts on EUR/CHF, ) Source: markets.ft.com – Click to enlarge

SNB sight deposits
Swiss private investors do not export their massive trade surplus with purchases assets in foreign currency, apparently because valuations of stock markets are too high and bond rates are too low still.

As consequence the SNB intervenes and takes the risk that private investors do not want. With this measure she either risks its bankruptcy or – over the long-term – she deviates from its mandate to avoid inflation.

Read More »

Weekly Speculative Positions (as of April 25): Bulls Take Charge of 10-year Note Futures, while Sterling Bears Hang On

26 days ago

Swiss Franc
Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.
The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The
reverse carry trade in form of the Long CHF started and lasted – without some interruptions – until the peg introduction in September 2011.
In mid 2011, the long CHF trade became a proper carry trade – and not a reverse carry trade anymore – because investors thought that the SNB would hike rates earlier than the Fed.
CHF Speculative Positions
Last data as of April 25:
The net short CHF position has risen to 17K contracts (against USD). At the same time the net euro shorts have fallen (against USD). This implies that speculators are positioning themselves more towards EUR long against CHF short.
This could be expected after the French elections.

Speculative Positions
Choose Currency[embedded content]
source: Oanda

The striking development among speculators in the futures market is the reversal of the record gross (and net) short Treasury note position two months ago.

Read More »

Swiss Retail Sales, March: +1.8 percent Nominal and +0.7 percent Real

26 days ago

The Used Goods Question
Retail sales in several countries like Germany, Japan and Switzerland continue to fall or they remain steady for years.
In the United States they have strongly risen recently. We should remind readers, that used goods sold via Ebay or similar, are not contained in this statistics. Still they create economic value for the purchases. By mentality, Swiss, Germans or Japanese pay more attention so that used goods do not lose their value so quickly. Hence used goods have higher economic value in these countries than in others.
From the press release:
Neuchâtel, 01.05.2017 (FSO) – Turnover in the retail sector rose by 1.8% in nominal terms in March 2017 compared with the previous year. This is the sharpest increase since June 2014. Seasonally adjusted, nominal turnover rose by 0.6% compared with the previous month. These are provisional findings from the Federal Statistical Office (FSO).
Real turnover in the retail sector also adjusted for sales days and holidays rose by 2.1% in March 2017 compared with the previous year. Real growth takes inflation into consideration. Compared with the previous month, real, seasonally adjusted retail trade turnover registered an increase of 0.7%.

Read More »

FX Weekly Review, April 24 – 29: Dollar Remains the Fulcrum

26 days ago

Swiss Franc Currency Index

Trade-weighted index Swiss Franc, April 29(see more posts on Swiss Franc Index, ) Source: markets.fx.xom – Click to enlarge
Swiss Franc Currency Index (3 years)
The Swiss Franc index is the trade-weighted currency performance (see the currency basket)On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 33% of the SNB portfolio and 25% of Swiss exports (incl. countries like China or Arab countries that use the dollar for exchanges).

Contrary to popular believe, the CHF index gained only 1.73% in 2015. It lost 9.52% in 2014, when the dollar (and yuan) strongly improved.

 

 

 

Swiss Franc Currency Index (3 years), April 29(see more posts on Swiss Franc Index, ) Source: markets.ft.com – Click to enlarge

USD/CHF
Often the US dollar, as the numeraire, seems to be the main actor in the foreign exchange market.
Other times, the dollar appears to be at the fulcrum between European currencies on one hand, and the dollar-bloc currencies on the other hand. Another way expressing this is whether there is a dollar-move underway or is it really more about the crosses.

US Dollar/Swiss Franc FX Spot Rate, April 29(see more posts on USD/CHF, ) Source: markets.ft.

Read More »

SNB posts 7.9 billion CHF Profit in Q1

April 27, 2017

From the official news release

Interim results of the Swiss National Bank as at 31 March 2017

The Swiss National Bank (SNB) reports a profit of CHF 7.9 billion for the first quarter of 2017.

A valuation gain of CHF 2.2 billion was recorded on gold holdings. The profit on foreign currency positions amounted to CHF 5.3 billion.

The SNB’s financial result depends largely on developments in the gold, foreign exchange and capital markets. Strong fluctuations are therefore to be expected, and only provisional conclusions are possible as regards the annual result.

The increasing volatility of SNB Earnings
Annual results are not really definite. Given that the SNB accumulates foreign currencies with interventions, they have huge swings.
But the SNB may lose 50 billion in one year and win 60 billion in the next year or vice verse

SNB Results Longterm 2016 – Click to enlarge

Profit on foreign currency positions

The net result on foreign currency positions amounted to CHF 5.3 billion.

Interest income accounted for CHF 2.1 billion and dividends for CHF 0.6 billion. Movements in bond prices differed from those in share prices. A loss of CHF 1.6 billion was recorded on interest-bearing paper and instruments.

Read More »

Swiss Trade Balance March 2017: Increase in Exports and Stagnation of Imports

April 27, 2017

We do not like Purchasing Power or Real Effective Exchange Rate (REER) as measurement for currencies. For us, the trade balance decides if a currency is overvalued. Only the trade balance can express productivity increases, while REER assumes constant productivity in comparison to trade partners.
On the other side, a rising trade surplus may also be caused by a higher savings rate while the trade partners decided to spend more. Recently Europeans started to increase their savings rate, while Americans reduced it. This has led to a rising trade and current surplus for the Europeans.
To control the trade balance against this “savings effect”, economists may look at imports. When imports are rising at the same pace as GDP or consumption, then there is no such “savings effect”.
After the record trade surpluses, the Swiss economy may have turned around: consumption and imports are finally rising more than in 2015 and early 2016.
Swiss National Bank wants to keep non-profitable sectors alive
Swiss exports are moving more and more toward higher value sectors: away from watches, jewelry and manufacturing towards chemicals and pharmaceuticals. With currency interventions, the SNB is trying to keep sectors alive, that would not survive without interventions.

Read More »

Weekly Speculative Positions: CHF Position Stands at same Position

April 25, 2017

Swiss Franc
Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.
The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The
reverse carry trade in form of the Long CHF started and lasted – without some interruptions – until the peg introduction in September 2011.
In mid 2011, the long CHF trade became a proper carry trade – and not a reverse carry trade anymore – because investors thought that the SNB would hike rates earlier than the Fed.
CHF Speculative Positions
Last data as of April 18:
The net short CHF position stands at 13K contracts (against USD).

Speculative Positions
Choose Currency[embedded content]
source: Oanda
After March 28, Eurozone inflation data was released. Core inflation has even fallen from 0.9 to 0.7%; therefore a ECB rate hike will not come soon. For the next weeks, we expect a move into euro shorts.
In the last week, speculators reduced their CHF net short position to 13K contracts (against USD).

Read More »

FX Weekly Review, April 17 – 22: Dollar Technicals Trying to Turn, but…

April 23, 2017

Swiss Franc Currency Index
While the dollar index had another bad week with a 0.75% less, the Swiss Franc currency index could accumulate the corresponding gains. Main reason is that the EUR/CHF rose over 1.07.
The euro is still the main component of the Swiss Franc index, but the dollar is recovering thanks to rising pharmacy exports to the U.S.

Trade-weighted index Swiss Franc, April 22(see more posts on Swiss Franc Index, ) Source: markets.ft.com – Click to enlarge

Swiss Franc Currency Index (3 years)
The Swiss Franc index is the trade-weighted currency performance (see the currency basket)On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 33% of the SNB portfolio and 25% of Swiss exports (incl. countries like China or Arab countries that use the dollar for exchanges).

Contrary to popular believe, the CHF index gained only 1.73% in 2015. It lost 9.52% in 2014, when the dollar (and yuan) strongly improved.

 

 

 

Swiss Franc Currency Index (3 years), April 22(see more posts on Swiss Franc Index, ) Source: markets.ft.com – Click to enlarge
USD/CHF
For the first time in April, the USD/CHF dived under parity. The next target is the 0.98 achieved.

Read More »

FX Weekly Review, April 10-14: Swiss Franc loses against the Yen, but wins against Dollar

April 16, 2017

Swiss Franc Currency Index
Last week the Swiss Franc improved against both euro and dollar, but – compared to its safe-haven counterpart Japanese Yen – it had a bad performance. We expect strong SNB interventions, that reflect the demand for CHF safe-haven.

Trade-weighted index Swiss Franc, April 14(see more posts on Swiss Franc Index, ) Source: markets.ft.com – Click to enlarge
Swiss Franc Currency Index (3 years)
The Swiss Franc index is the trade-weighted currency performance (see the currency basket)On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 33% of the SNB portfolio and 25% of Swiss exports (incl. countries like China or Arab countries that use the dollar for exchanges).

Contrary to popular believe, the CHF index gained only 1.73% in 2015. It lost 9.52% in 2014, when the dollar (and yuan) strongly improved.

 

 

 

Swiss Franc Currency Index (3 years), April 14(see more posts on Swiss Franc Index, ) Source: markets.ft.com – Click to enlarge

USD/CHF
The US also dropped the largest non-nuclear bomb on IS bunkers in Afghanistan.  At the same time, it sent an aircraft carrier group toward North Korea.

Read More »

Swiss Producer and Import Price Index in March 2017: 0.1 percent rise

April 13, 2017

The Producer Price Index (PPI) or officially named "Producer and Import Price Index" describes the changes in prices for producers and importers. For us it is interesting because it is used in the formula for the Real Effective Exchange Rate. When producers and importers profit on lower price changes when compared to other countries, then the Swiss Franc reduces its overvaluation. The Swiss PPI values of -6% in 2015 (see below), compared to -3% in Europe or -1% in the U.S., diminished the overvaluation. See more in Is the Swiss Franc overvalued?
Producer and Import Price Index in March 2017
From the data release of Swiss Statistics:
Neuchâtel, 13.04.2017 (FSO) – The Producer and Import Price Index rose in March 2017 by 0.1% compared with the previous month, reaching 100.3 points (base December 2015 = 100). The slight rise is due in particular to higher prices for scrap. Compared with March 2016, the price level of the whole range of domestic and imported products rose by 1.3%. These are some of the findings from the Federal Statistical Office (FSO).

Switzerland Producer Price Index (PPI) YoY March 2017(see more posts on Switzerland Producer Price Index, ) Source: investing.

Read More »

Weekly SNB Interventions and Speculative Positions: Back to 2.4 bn Intervention per Week

April 10, 2017

Headlines Week April 10, 2017
We were arguing in the previous months, that the EUR/CHF is trending towards parity.
There are three reasons:
Continuing SNB interventions
Strengthening Swiss local demand, as also visible in the GDP release.
Speculators increase their dollar shorts against Euro and reduce them against CHF.
The tendency of point 3 had been interrupted when the ECB appeared to be less dovish.
FX Last Week:
Low Eurozone inflation let the euro fall again versus both dollar and Swiss franc. The EUR/CHF ended at 1.0680 for the week.
At the End of march, Eurozone inflation data was released. Core inflation has even fallen from 0.9 to 0.7%. Therefore a ECB rate hike will not come soon.
This implies that the EUR/CHF may fall towards parity in the next two years. The SNB might allow this because of the positive developments in Swiss internal demand mentioned above.

Euro/Swiss Franc FX Cross Rate, April 10(see more posts on EUR/CHF, ) Source: markets.ft.com – Click to enlarge
.

SNB sight deposits
Swiss private investors do not export their massive trade surplus with purchases assets in foreign currency, apparently because valuations of stock markets are too high and bond rates are too low still.
As consequence the SNB intervenes and takes the risk that private investors do not want.

Read More »

Weekly Speculative Positions (April 4 Data): Reduction in CHF Net Shorts

April 10, 2017

Swiss Franc
Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.
The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The
reverse carry trade in form of the Long CHF started and lasted – without some interruptions – until the peg introduction in September 2011.
In mid 2011, the long CHF trade became a proper carry trade – and not a reverse carry trade anymore – because investors thought that the SNB would hike rates earlier than the Fed.
CHF Speculative Positions
Last data as of April 4:
Speculators reduced their net short euro exposure until March 21. Apparently they do not understand the difference between core inflation and the headline figure.

Speculative Positions
Choose Currency[embedded content]
source: Oanda
After March 28, Eurozone inflation data was released. Core inflation has even fallen from 0.9 to 0.7%; therefore a ECB rate hike will not come soon. For the next weeks, we expect a move into euro shorts.
In the last week, speculators reduced their CHF net short position to 13K contracts (against USD).

Read More »

FX Weekly Review, April 03-08: Dollar Recovery Can Continue, 10-year Yield Set to Rise

April 10, 2017

Swiss Franc Currency Index
In the last week, the Swiss Franc index lost a little territory as compared to the dollar index.
Finally it ended, where it started one month ago.

Trade-weighted index Swiss Franc, April 08(see more posts on Swiss Franc Index, ) Source: markets.ft.com – Click to enlarge
Swiss Franc Currency Index (3 years)
The Swiss Franc index is the trade-weighted currency performance (see the currency basket)On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 33% of the SNB portfolio and 25% of Swiss exports (incl. countries like China or Arab countries that use the dollar for exchanges).

Contrary to popular believe, the CHF index gained only 1.73% in 2015. It lost 9.52% in 2014, when the dollar (and yuan) strongly improved.

 

 

 

Swiss Franc Currency Index (3 years), April 08(see more posts on Swiss Franc Index, ) Source: markets.ft.com – Click to enlarge

USD/CHF
The US dollar appreciated against most of the major currencies last week. The Japanese yen was the chief exception.  It rose about 0.5% as US yields remained heavy and equities were mostly softer.

US Dollar/Swiss Franc FX Spot Rate, April 08(see more posts on USD/CHF, ) Source: markets.ft.

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Swiss Retail Sales, February: +0.5 percent Nominal and +0.6 percent Real

April 3, 2017

The Used Goods Question
Retail sales in several countries like Germany, Japan and Switzerland continue to fall or they remain steady for years.
In the United States they have strongly risen recently. We should remind readers, that used goods sold via Ebay or similar, are not contained in this statistics. Still they create economic value for the purchases. By mentality, Swiss, Germans or Japanese pay more attention so that used goods do not lose their value so quickly. Hence used goods have higher economic value in these countries than in others.
From the press release:
Neuchâtel, 03.04.2017 (FSO) – Turnover in the retail sector rose by 0.5% in nominal terms in February 2017 compared with the previous year. However, excluding turnover from service stations, retail turnover fell by 0.3%. Seasonally adjusted, nominal turnover rose by 0.9% compared with the previous month. These are provisional findings from the Federal Statistical Office (FSO).

Real turnover in the retail sector also adjusted for sales days and holidays rose by 0.6% in February 2017 compared with the previous year. Real growth takes inflation into consideration. Compared with the previous month, real, seasonally adjusted retail trade turnover registered an increase of 0.6%.

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Weekly Sight Deposits and Speculative Positions: SNB interventions are rising again

April 3, 2017

Headlines Week April 03, 2017
We were arguing in the previous months, that the EUR/CHF is trending towards parity.
There are three reasons:
Continuing SNB interventions
Strengthening Swiss local demand, as also visible in the GDP release.
Speculators increase their dollar shorts against Euro and reduce them against CHF.
The tendency of point 3 had been interrupted when the ECB appeared to be less dovish.
FX Last week:
Low Eurozone inflation let the euro fall again versus both dollar and Swiss franc.
The EUR/CHF ended at 1.0680 for the week.

Euro/Swiss Franc FX Cross Rate, April 03(see more posts on EUR/CHF, ) Source: markets.ft.com – Click to enlarge

SNB sight deposits
Swiss private investors do not export their massive trade surplus with purchases assets in foreign currency, apparently because valuations of stock markets are too high and bond rates are too low still.
As consequence the SNB intervenes and takes the risk that private investors do not want. With this measure she either risks its bankruptcy or – over the long-term – she deviates from its mandate to avoid inflation. The last time she realized that was in January 2015, when the peg broke.
We should remind that the EUR/CHF is clearly higher than the 0.

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Weekly Speculative Positions: Last Reduction of Euro Short Positions?

April 3, 2017

Swiss Franc
Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.
The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The
reverse carry trade in form of the Long CHF started and lasted – without some interruptions – until the peg introduction in September 2011.
In mid 2011, the long CHF trade became a proper carry trade – and not a reverse carry trade anymore – because investors thought that the SNB would hike rates earlier than the Fed.
CHF Speculative Positions
Last data as of March 21:
Speculators continued to reduce their net short euro exposure until March 28. Apparently they do not understand the difference between core inflation and the headline figure.

Speculative Positions
Choose Currency[embedded content]
source: Oanda
After March 28, Eurozone inflation data was released. Core inflation has even fallen from 0.9 to 0.7%; therefore a ECB rate hike will not come soon. For the next week, we expect far more Euro shorts.
Speculators increased their CHF net short position to 16K contracts (against USD).

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FX Weekly Review, March 27 – 31: Euro breaks down against USD and CHF

April 2, 2017

Swiss Franc Currency Index
Weak inflation figures in the euro zone let the common currency fall against both the dollar and the Swiss franc.
Still last week, the Swiss Franc index had some losses against the US dollar index.

Trade-weighted index Swiss Franc, April 01(see more posts on Swiss Franc Index, ) Source: markets.ft.com – Click to enlarge
Swiss Franc Currency Index (3 years)
The Swiss Franc index is the trade-weighted currency performance (see the currency basket)On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 33% of the SNB portfolio and 25% of Swiss exports (incl. countries like China or Arab countries that use the dollar for exchanges).

Contrary to popular believe, the CHF index gained only 1.73% in 2015. It lost 9.52% in 2014, when the dollar (and yuan) strongly improved.

 

 

 

Swiss Franc Currency Index (3 years), April 01(see more posts on Swiss Franc Index, ) Source: markets.ft.com – Click to enlarge

USD/CHF
The US dollar rose against most of the major currencies in the last week of March, except the Australian and Canadian dollars, and the British pound.

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FX Weekly Review, March 27 – 30: Euro breaks down against USD and CHF

April 2, 2017

Swiss Franc Currency Index
Weak inflation figures in the euro zone let the common currency fall against both the dollar and the Swiss franc.
Still last week, the Swiss Franc index had some losses against the US dollar index.

Trade-weighted index Swiss Franc, April 01(see more posts on Swiss Franc Index, ) Source: markets.ft.com – Click to enlarge
Swiss Franc Currency Index (3 years)
The Swiss Franc index is the trade-weighted currency performance (see the currency basket)On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 33% of the SNB portfolio and 25% of Swiss exports (incl. countries like China or Arab countries that use the dollar for exchanges).

Contrary to popular believe, the CHF index gained only 1.73% in 2015. It lost 9.52% in 2014, when the dollar (and yuan) strongly improved.

 

 

 

Swiss Franc Currency Index (3 years), April 01(see more posts on Swiss Franc Index, ) Source: markets.ft.com – Click to enlarge

USD/CHF
The US dollar rose against most of the major currencies in the last week of March, except the Australian and Canadian dollars, and the British pound.

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Weekly Sight Deposits and Speculative Positions: SNB interventions are rising again

March 28, 2017

Headlines Week March 27, 2017
We were arguing in the last weeks, that the EUR/CHF is trending towards parity.
There are three reasons:
Continuing SNB interventions
Strengthening Swiss local demand, as also visible in the GDP release.
Speculators increase their dollar shorts against Euro and reduce them against CHF.
Point 3 was not fulfilled last week.
FX Llst weeks:
The EUR/CHF suddenly appreciated with the ECB meeting, when Draghi seemed less dovish than before. The rate rose from the previous 1.0650 “intervention level” to over 1.0750. With the SNB meeting, the EUR/CHF receded again a bit. But as we see below, the FX rate is still at the mercy of the Swiss central bank.

Euro/Swiss Franc FX Cross Rate, March 27(see more posts on EUR/CHF, ) Source: markets.ft.com – Click to enlarge

SNB sight deposits
Swiss private investors do not export their massive trade surplus with purchases assets in foreign currency, apparently because valuations of stock markets are too high and bond rates are too low still.
As consequence the SNB intervenes and takes the risk that private investors do not want. With this measure she either risks its bankruptcy or she deviates from its mandate to avoid inflation. The last time she realized that was in January 2015, when the peg broke.

Read More »