SNB & CHF

Most people assume that prices move as a result of changes in the money supply. Instead, let’s look at the effect of changes in interest. To start, consider a hamburger restaurant. Suppose that the average profit in the burger business is ten percent of invested capital. If MacDowell’s is thinking about expanding, it has to consider the interest rate. Why? Typically, most of the capital to expand a business is borrowed. MacDowell’s has to borrow the cash to build out its new store. If the...

The focus of most investors is the rate decision by the Federal Reserve tomorrow.  Since the central bank completed its asset purchase program at the end of last year, a rate hike has been understood as a matter of time.   Expectations for a June lift-off were dashed by the disappointing economic activity at the start of the year.  Officials correctly anticipated the headwinds to be temporary, but expectations for a September hiked were dashed by the heightened volatility seen in August. ...

The euro made marginal news highs near $1.1060 while sterling and the yen have been confined to yesterday's ranges.  European equities are bouncing off ten-week lows.   The dollar-bloc is firm; the upbeat RBA meetings provided only a short-lived fillip higher.  Oil prices are steady to firmer after yesterday's recovery.   Sweden's Riksbank is the first of four major central banks to meet this week.  As widely expected, it left its repo rate at minus 35 bp.  Less anticipated, it refrained...

Building the world's steepest funicular railway from Schwyz to Stoos is proving to be much more difficult than planners imagined. (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: Website: http://www.swissinfo.ch Channel:...

Following the mini-devaluation in August, the yuan appreciated in September and October.  It began depreciating again in November and this has continued through the first half of December.   The dollar finished the local session at new multi-year highs against the yuan.  Many observers see in the pre-weekend announcement about monitoring the yuan against a basket an indication of the intentions of officials to push their currency down further against the dollar.  We suggest that China...

(from my colleague Dr. Win Thin) EM starts the FOMC week off on a soft footing.  Besides the prospects of Fed liftoff Wednesday, oil prices are making new cycle lows.  Uncertainty about China’s FX policy is also making markets nervous, though we think this concern is misplaced.  Overall, the global backdrop for EM remains very negative and we do not see much chance for a rebound after Fed lift-off is seen.  In recent days, USD has made new all-time highs against COP, MXN, and ZAR. ...

Spain goes to the polls on December 20.  The country's political and economic dynamics are different than other EMU countries that have held elections this year.  The economy is among the strongest performers in eurozone, though unemployment remains stubbornly high.  Today is the last day that election polls can be published.  El Pais and El Mundo papers published the results of surveys today.  They confirm what many have come to expect.  The ruling center-right Popular Party will remain...

The dollar-euro is the most actively traded currency pair in the world.  It is often what is meant when people ask where is the dollar trading.   Dollar bullish sentiment prevailed in 2015, but many large banks doubt that it will continue in 2016.  This Great Graphic from the Wall Street Journal shows the euro forecasts of eleven major banks.   Indeed, it appears that only one of the eleven banks expect the euro to finish next year below parity ($1.00).  Three banks, HSBC, UBS and JP...

The US dollar is firmer against the euro, sterling and yen, but within the ranges seen before the weekend. The greenback is softer against the dollar-bloc currencies after early gains were unwound.  The biggest mover has been the South African rand, which is up a little more than 5%, retracing nearly half of last week's losses.  Under strong pressure, President Zuma reinstated former Finance Minister Gordhan. Gordhan had been Finance Minister from 2009 until 2014.  The macroeconomic...

“That [half a dollar of buying] frenzy was not stackers lining up to buy phyz. It was speculators buying paper. Why does that matter? Speculators, who typically use leverage, can’t hold the market price against the tide of the hoarders. They can push for a while, but they have to close their positions sooner or later, either to take profits (as they reckon them, in dollars) or to stop losses.” This is what we wrote last week. It turned out to be prescient. This week, the price of silver...