SNB & CHF

Sometimes the news stream drives prices, and sometimes the price action drives the narratives.  We argued that the sharp decline in equities at the start of the year was fanned the doom and gloom in the media and market commentary.  Many had been taking about a new financial crisis and parallels were drawn between the price action now and the 2007-2008 period. Perhaps it was the green shoot of spring flowers in the Northern Hemisphere.  Perhaps it was the realization that the sell-off was...

It is common knowledge by now that Federal Reserve Chairman Alan Greenspan oversaw, enabled and approved of, a major transition in the US economy. His infamous “Greenspan-put” in which his actions at the central bank would be driven, if not dictated, by the whims of financial markets, clearly led to higher asset prices. Investors obviously picked up on the strong bias in the Greenspan-Fed’s conduct of monetary policy as they slashed rates at the tiniest hiccup in financial markets, and...

The US dollar fell against all the major and most of the emerging market currencies last week.   Risk appetites have been rekindled, and the yen has gone from the best performer in recent weeks to the worst over the past week.   Major equity markets advanced for the third week.  The MSCI Emerging Market equity index has rallied more than 15% since the January 21 low, and nearly 12% since the February 11 low.  The index finished the week at its best level since January 4.  Oil prices are...

Speculators in the currency futures made mostly small adjustments to their gross foreign currency exposure.  There were only three position adjustments of more than 5k contacts.   Since the markets turned on 11 February, the Canadian dollar has been the strongest of the major currencies, appreciating a little more than 4.5% against the US dollar.    Gross shorts have been nearly halved since then.  They were cut by 6.9k contracts or about 10% to reach 61.5k contracts during the recent...

According to the latest news release, the Swiss National Bank expects an annual loss of 23 billion CHF, after reporting a loss of 50 billion at the end of June. Primarily thanks to the stronger dollar, the SNB was able to achieve unrealized gains of 27 billion CHF in the second half. This reduced her annual loss to 23 billion. With its rate hike, Fed is helping the SNB: the dollar has appreciated by 6% since July. Balance Sheet The SNB balance sheet looks as follows. In this post we...

A cemetery with 1,300-year-old graves has been discovered in the village of Fehraltorf. Archaeologists have also found jewellery, weapons and everyday objects from the early Middle Ages. (SRF/swissinfo.ch) --- swissinfo.ch is the international branch of the Swiss Broadcasting Corporation (SBC). Its role is to report on Switzerland and to provide a Swiss perspective on international events. For more articles, interviews and videos visit swissinfo.ch or subscribe to our YouTube channel:...

(from my colleague Dr. Win Thin) 1) China’s central bank announced a 0.5% cut in the required reserve ratio2) Moody's cut the outlook on China's Aa3 rating to negative from stable3) Argentina and the main holdouts agreed to a debt restructuring deal4) Brazilian press reported that a senator implicated both Rousseff and Lula in the corruption probe as part of a plea bargain5) Chile is cutting back government spending this year in response to low copper prices In the EM equity space,...

The optics of the US jobs report was better than the details, which is the exact opposite of the January employment report.  The US dollar strengthened on the news.  The US created 242k jobs in February.  The consensus was for around 195k.  The January gain of 151k was revised up to 172k The household survey showed a 530k increase.  The market expected a 175k.  In January the household survey showed an increase of 615k.  Combined the household survey has showed over a million new jobs. ...

The US dollar is mixed ahead of the US employment data.  The Antipodeans and Scandis are doing best while sterling and the Canadian dollar are under-performing.  Investors appetite for risk has increased.  The market is confident that the next Fed hike is unlikely to be delivered before June.  The implied yield on the June Fed funds futures contract is 45 bp.  This is up from 38.5 bp on February 11.  If the Fed were to hike rates on June 15 and Fed funds were to average 38 bp in the first...

For the Swiss press, 2015 has been the year of the “Swiss franc shock“. Based on the GDP release from the Swiss ministry of economics (SECO), we wanted to know what in the Swiss economy got really “shocked”. The following table compares the Swiss GDP components and population data since 2009. Economists might think that the “Swiss franc shock“, the suddenly far stronger franc in January 2015 should lead to less exports and more imports, hence to a considerable weakening of “Net...