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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

Weekly Speculative Positions (as of July 18): Speculators short CHF against USD again

21 hours 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

Read More »

FX Weekly Review, July 17 – July 22: Euro and CHF move upwards against Dollar

2 days ago

Swiss Franc vs USD and EUR
Both Swiss Franc and Euro were moving upwards against the dollar. So CHF gained 3% versus the dollar in the last month. The Euro is the strongest currency. CHF lost around 1.3% against the Euro.

EUR/CHF and USD/CHF, July 22(see more posts on EUR/CHF, USD/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 »

Swiss Trade Balance First half of 2017: Exports with record value

5 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

Read More »

Weekly SNB Interventions and Speculative Positions: Hawkish ECB, less SNB interventions

8 days ago

FX
The EUR/CHF remained over 1.10 in the last week, thanks to hawkish comments from ECB president Draghi.
Headlines Week July 17, 2017
On June 27, Draghi told the audience at the annual ECB Forum that transitory factors were holding back inflation.
This has boosted the euro against both USD and CHF.
Our opinion, however, is that this “transition” is very long, possibly comparable to the Japanese deflation/ low-inflation over decades.
At the latest from December/January 2017/2018, the EUR/CHF must go down again, See the following:

Euro/Swiss Franc FX Cross Rate, July 17(see more posts on EUR/CHF, ) Source: markets.ft.com – Click to enlarge

Why must EUR/CHF go down again?
The graph shows that the European

Read More »

Weekly Speculative Positions (as of July 11): Speculators Switch to CHF Long against USD

8 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

Read More »

FX Weekly Review, July 10 – July 15: CHF Winning against USD, but losing vs. Euro

8 days ago

Swiss Franc vs USD and EUR
The Euro remained the strongest among EUR, CHF and USD during the last month.
The Swiss lost against EUR 1.5%, while it gained versus the dollar 0.75%.

EUR/CHF and USD/CHF, July 15(see more posts on EUR/CHF, USD/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).

Contrary to popular believe, the CHF index

Read More »

Swiss Producer and Import Price Index in May 2017: +0.1 YoY, -0.3 MoM

June 15, 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. 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 May 2017
From the data release of Swiss Statistics:

Read More »

Weekly Speculative Positions (as of June 06): Speculators Trimmed Exposure Ahead of Super Thursday

June 12, 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

Read More »

FX Weekly Review, June 05 – June 10: Sterling Leads Dollar Recovery

June 11, 2017

Swiss Franc vs USD and EUR
The US Dollar has lost 4% against the franc since the beginning of May, while the euro is down only 1%. Most important events in this week were the ECB meeting and the UK elections. The inability of the Tory Party to secure a parliamentary majority spurred a sharp decline in sterling.

EUR/CHF and USD/CHF, June 10(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

Read More »

Weekly Speculative Positions (as of May 30): Speculators make Small Adjustments, but Like that Peso

June 5, 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

Read More »

FX Weekly Review, May 29 – June 03: Dollar Dogged by Disappointing Data

June 4, 2017

Swiss Franc vs USD and EUR
While the Euro traded in the range between 1.08 and 1.09, the dollar declined by nearly 3%.

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), June 03(see more posts on

Read More »

Swiss Retail Sales, April: -1.4 percent Nominal and -1.2 percent Real

June 1, 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, 01.06.2017 (FSO) – Turnover in the retail sector fell by 1.4% in nominal terms in April 2017 compared with the previous year. Seasonally

Read More »

Switzerland Q1 GDP: Gross domestic product in the 1st quarter 2017

June 1, 2017

Switzerland’s real gross domestic product (GDP) grew by 0.3 % in the first quarter of 2017*. Private consumption growth expanded only slightly, while government consumption rose moderately. Following the previous quarter’s fall, investment in construction and equipment increased. The trade balance contributed notably to overall GDP growth. On the production side, growth was largely driven by manufacturing, while service sector performance varied widely. Value added rose in healthcare and social work activities, but dropped in retail services, in financial services and in certain other service sectors. The GDP deflator experienced a year-on-year increase for the first time in 13 quarters.

After a very strong previous

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Weekly Speculative Positions (as of May 23): Speculators Remain Bearish the Dollar and Bullish Bonds

May 29, 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

Read More »

FX Weekly Review, May 22 – 27: Is the Dollar Going To Turn?

May 29, 2017

Swiss Franc vs USD and EUR
The Federal Reserve is on track to hike rates in the middle of June.
It will be the third hike since the November election. In addition to keeping the door open to another hike this year, the Federal Reserve has signaled its intention to begin, however slowly, the reduction of its balance sheet.

In the meantime, regardless of potential changes in its risk assessment, the ECB is unlikely to lift the negative deposit rate or even stop expanding its balance sheet this year. The Bank of Japan is expanding its balance sheet too, though not that the JPY80 trillion a year as had been the case. When stripped of food and energy, Japan is still not experiencing inflation.

Although the eurozone has

Read More »

Swiss Trade Balance April 2017: Exports Stagnate

May 23, 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 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

May 22, 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 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

May 21, 2017

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

May 16, 2017

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

May 15, 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. 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

May 15, 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 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?

May 13, 2017

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

May 10, 2017

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

May 9, 2017

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

May 8, 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 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

May 7, 2017

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

May 3, 2017

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

May 1, 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 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

May 1, 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, 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

May 1, 2017

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.

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