SNB & CHF

The thinness of the order-driven capital markets is making price action that seems more inexplicable than usual.  The US dollar is mixed. It has recouped all the ground it lows against the euro yesterday, as the single currency briefly dipped below $1.09 in the North American morning.  It was unable to build on yesterday's gains that had carried it up to almost $1.0950.   Despite some fraying, the $1.08-$1.10 trading range still seems intact.   Sterling which had been sold to eight-month...

Many Swiss ski resorts are dealing with a lack of snow because of relatively warm winter temperatures, and only those with artificial snow are managing to open ski slopes as usual. (SRF/swissinfo.ch) Some of the higher resorts in the south-western canton of Valais are open for ski business. St Moritz in eastern Switzerland, with only 15cm of snow on its higher pistes, is issuing visitors with a list of 400 things to do if it does not snow, including skating and taking in a little local...

1.  China's Central Economic Work Conference is responsible for setting the annual GDP target. Although it was not formally announced, President Xi previously indicated that the goal for the economy to expand by around 6.5% a year through 2020.  More telling than the GDP target is the intentions expressed in the new slogan:  flexible monetary policy, forceful fiscal policy.  For Chinese officials, these are not ends in themselves but means to another end.  In this case, the goal is to...

Soggy Dollars There’s this article, saying rising rates are good for gold. It repeats two old errors: gold goes up, and things that cause it (e.g. a collapsing paper currency) are “good”. We have recently been emphasizing that interest does not correlate well with the price of gold. If you want to speculate on the gold price, rising rates may not be a good trading signal. Pure Gold Please forgive us once, the sin of linking an article by our own Keith Weiner. Keith argues that Yellen is...

On Wednesday Dec 16, Federal Reserve Chair Janet Yellen announced that the Fed was raising the federal funds rate by 25 basis points. Let’s get one thing out of the way. This is not a move towards free markets. Whether the Fed sets interest lower, or whether it sets interest higher, we still have central planning. We still have price fixing of interest rates. Interest rates may be set too low. However, forcing interest up is no cure. We need to eliminate central planning, and move to a free...

1.  The election in Spain did not lift the uncertainty but re-redoubled it.  Given the outcome, it is difficult envision a majority government.  Purely looking at the numbers, a coalition between the Popular Party and the Socialists is simplest solution.  It is like Pasok and the New Democracy in Greece and the Christian and Social Democrats in Germany. While such grand coalitions maybe political expedient, it sends a powerful signal that there is not a significant difference between the...

(co-authored with my colleague Sam Waters) Inflation or indeed its opposite has driven monetary policy among the largest high income economies. With nominal rates thought to be bounded by zero, the US, UK, and Japan engaged in operations to increase the size of the central bank’s balance sheets as an unorthodox channel of easing monetary conditions. European central banks demonstrated interest rates can fall below zero.  Countries have adopted different measures of consumer inflation. ...

The prices of the metals were sagging. Silver was trading around $13.80. On Wednesday, Janet “Good News” Yellen said the magic words. The Federal Reserve hiked the federal funds rate by 25 basis points. The price of silver was surging in anticipation of the news (we assume). Within an hour or so of the announcement, it had spiked to $14.32, up 3.8% in a few hours. Despite our note on 8 November, this week we have seen more than one article claiming that a rising interest rate is good for...

The broad interpretative framework we developed since late 2014, one that centers the dy-synchronization of the major economies, will retain its usefulness into the New Year and beyond.  The first phase of divergence was characterized by the Federal Reserve standing pat after winding down their open-ended asset purchase operations (QE3+) while many central banks from high income countries, including the eurozone, Japan, China, Canada, Australia, New Zealand, Sweden, and Norway eased...

Speculative position adjustments in the currency futures were minimal in the immediate aftermath of the ECB's December 3 meeting and US employment data the following day. However, activity dramatically increased in the days ahead of the FOMC meeting on December 16.   In most Commitment of Traders reports the gross position adjustment of 10k or more contracts is seen in three or four of the 16 gross currency positions we track.  In the latest report, which covers the five sessions before...