SNB & CHF

Summary: Japanese investors bought foreign bonds in the last week of March for the first time in nine weeks. Foreigners bought the most Japanese stocks since last April. The pain trade is for a break of JPY110. Japan’s Ministry of Finance reports portfolio flows on a weekly basis with a week lag. The data just reported covers the last week in March, as the Japanese  fiscal year was drawing to a close. Japanese...

The payroll report disappointed again, though it was deficient in ways other than are commonly described. The monthly change is never a solid indication, good or bad, as the BLS’ statistical processes can only get it down to a 90% confidence interval, and a wide one at that. It means that any particular month by itself specifies very little, except under certain circumstances. This month just happens to be one,...

See the introduction and the video for the terms gold basis, co-basis, backwardation and contango. Input Data Errors Dear Readers, I owe you an apology. I made a mistake. I am writing this letter in the first person, because I made the mistake. Let me explain what happened. I wrote software to calculate the gold basis and co-basis (and of course silver too). The app does not just calculate the near contract. It...

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:...

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 carry trade against CHF collapsed. The...

Swiss Franc EUR/CHF - Euro Swiss Franc, April 10(see more posts on EUR/CHF, ) - Click to enlarge GBP/CHF The Pound and the Swiss Franc have had a strange relationship since the missile strike by the US on a Syrian Government airbase last week. Pound to Swiss Franc exchange rates plummeted before recovering and then exceeding expectations as we entered into the weekend. The ‘anomaly’ as some are now calling it,...

Stock Markets EM FX ended the week on a soft note, as the weaker than expected US jobs data was unable to derail the dollar’s rally. For the week, the worst performers were ZAR (-3%), TRY (-2.5%), and RUB (-2%). CZK bucked the trend, rising after the CNB exited the cap. This week, higher inflation readings in the US could draw market focus back to Fed tightening, which would be negative for EM. Risks of further flare...

There were no celebrations; no horn or trumpets, nary a sound, but an important shift took place last week. The shift was signaled by two events. The first was the US strike on Syria, and the second was investors’ willingness to look past Q1 economic data. The US missile strike on Syria was significant even if it fails to change the dynamics on the ground. It undermines the Trump Administration’s ability to “reset” the...

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...

The Czech National Bank (CNB) ended the EUR/CZK floor today. Timing was a little earlier than expected, but rising inflation and a robust economy warranted it.  We think it’s too soon to talk about a rate hike, as we expect the koruna to overshoot to the strong side. Policy Outlook Price pressures are rising, with CPI accelerating to 2.5% y/y in February.  March data will be reported April 10, with consensus at 2.6%...