SNB & CHF

The Canadian dollar's advance continues.  Neither the widening of interest rate differentials in the US favor nor a poor employment report has managed to buckle the Loonie. Oil and the general risk-on mood trump the other concerns.  In addition, investors are concluding that fiscal stimulus will reduce the possibility of additional monetary stimulus.  The implied yield on the June BA futures is now the highest since last June.  The Great Graphic, made on Bloomberg shows the greenback's...

“The Swissmakers” is one of the most successful Swiss films of all time. A satire on immigration, writer-director Rolf Lyssy talks about why it was so popular and why it stands the test of time. (Carlo Pisani, swissinfo.ch) It is estimated that when “The Swissmakers” came in cinemas in 1978 one in every five Swiss watched it, making it one of the most successful Swiss films ever in terms of number of viewers. Lyssy, who turned 80 at the end of February, spoke to swissinfo.ch from his...

The market reaction to Draghi's indication, once again, that interest rate policy has run its course, will be debated for some time.    Draghi delivered the goods that many investors said was lacking last December.  The ECB policy more than anyone expected.   All the boxes were checked.  Although the end date was not extended beyond March 2017, the four-year TLTROS will run into the new decade, and Draghi indicated that rates will remain low well beyond the end of the asset purchases....

The euro is paring the recovery that began in the middle of the ECB's press conference yesterday. The markets had reacted as one intuitively would expected to broad easing of interest rates and credit conditions.   The market reversed, and violently so, only after Draghi seemed to rule out further interest rate cuts.  Many investors took this to mean the ECB had gone all in and that monetary policy had reach the end.   We do not expect this interpretation to be sustained.   Even though...

Draghi delivered.  He managed to get approval for everything.  Rate cuts, acceleration of purchases, including corporate bonds to the purchase program and new long-term repos were announced.   The knee-jerk reaction was favorable.  The euro fell over 1% and peripheral European bonds rallied.   The deposit rate was cut 10 bp to minus 40 bp.  The asset purchases were increased by 20 bln euros a month to 80 bln.  Investment grade, non-financial corporate bonds would be included, easing...

Fasten your seat belts.  The ride is going to get bumpy.   Economists may differ on what the ECB will do.   Investors may differ on the market response.  This uncertainty ensures a strong market reaction. The euro is off about 0.25% after recovering in the North American session yesterday.  The euro has spent this week thus far mostly within last Friday's trading range.  It has finished the North American session in the last four sessions between $1.0999 and $1.1014 according to...

The former chief editor of “The Economist” Geoffrey Crowther published a great work on the development of balance of payments and current accounts over the long-term. It divides development into six phases, which are analogous to Shakespeare’s seven phases of life.The seven stages are: Young debtor nation, Mature debtor nation, Debt repayment nation, Young creditor nation, Mature creditor nation, Credit disposition /Asset Liquidation nation and the back to start stage Read our discussion...

Investors are skeptical of Chinese economic data.  However, news yesterday that Chinese exports fell by a quarter in February was shocking. Many worry about the implications not just for China, but for world growth.  It comes as the IMF is signaling it will likely cut its 3.4% global growth forecast next month.  There are three separate forces that impacted Chinese trade figures.  First are price changes.  The dramatic drop in commodity prices, for example,  distorts the value of imports...

German Chancellor Merkel was right. As the Greek crisis was winding down last summer, she noted that the refugee problem would be even more difficult.  And indeed, it is. The refugee issue is challenging Merkel’s leadership in Europe.  While her trademark has been her sensitivity to swings in sentiment, she has seemed rather tone-deaf in dealing with the refugee crisis. Merkel still out of step with their European allies Her move this week suggests she is still out of step with many of...

The Canadian dollar appears vulnerable.  It remains firm while the US two-year premium over Canada has risen sharply.   Like others, we do not expect the Bank of Canada to cut rates today and are looking past it. This Great Graphic was composed on Bloomberg.  It shows the 2-year spread (white line) and the US dollar against the Canadian dollar (yellow line).  We use two different scales, but the point is not so much how precise they have tracked each other.  With two different scales...