Category Archives: Europe

Central Bank, Europe, Trading

History : 6 September 2011 : Swiss National Bank acts to weaken strong franc

The Swiss National Bank (SNB) has set a minimum exchange rate of 1.20 francs to the euro, saying the current value of the franc is a threat to the economy.

http://www.bbc.com/news/business-14801324

“The Japanese example with yen intervention teaches us that intervention can work in the very short term but changing long-term global currency flows is near impossible – a lesson that the UK learned from George Soros,” Cooper said.

http://www.theguardian.com/business/2011/sep/06/switzerland-pegs-swiss-franc-euro

The long rumored Swiss Franc peg has arrived…

The Swiss National Bank is tired of the surging Franc, and is taking intervention to the next level.

Read more: http://www.businessinsider.com/wow-swiss-national-bank-takes-intervention-to-a-new-level-franc-plunges-2011-9#ixzz3CjnOQLC7

Exploiting the franc peg

We already are seeing some market parallels with the early signs of the great financial crisis of 2007-08: Peaking global inflation rates, topping formations in G10/emerging market equities and tightening bank liquidity. As European banks rush to raise funds and borrow U.S. dollars, their borrowing cost on USD funding has risen to its highest since 2008. But one thing is different — the Swiss franc.

The Swiss currency is no longer rallying the way it did during market distress on Eurozone debt concerns. It all changed when the Swiss National Bank (SNB) announcement pegging its currency against the euro at the EUR/CHF rate of 1.20, aimed at preventing excessive franc acceleration against the debt-ridden euro. As credit rating agencies rushed to downgrade the sovereign debt of Southern Europe in late 2009, investors rushed their savings out of the single currency and into safe-haven francs. The exodus took the form of cash flight, property sales and bank transfers as “default” became a recurring theme in Greece, Spain, Portugal Greece, Ireland and Italy.

Consequently, the franc soared 35% and 40% against the euro and the USD respectively from 2009 to September 2011.

http://www.futuresmag.com/2012/01/01/exploiting-the-franc-peg

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Europe

Pound in Peril as Opinion Poll Puts Scottish Separatists Ahead

Sterling markets are stirring on the risk of the U.K.’s 307-year-old union splintering, and that spells danger for the pound.

Britain’s currency is likely to weaken when markets resume trading after the weekend, strategists said following a poll that showed the Scottish independence campaign gained a lead for the first time this year with two weeks left before the vote. The pound fell the most in 14 months last week, and gauges of future price swings surged after the previous YouGov Plc showed the “No” campaign’s lead was shrinking.

“The referendum is on a knife edge,” saidNick Stamenkovic, an Edinburgh-based fixed-income strategist at broker RIA Capital Markets Ltd. “Markets have been too complacent but are now waking up to the increased risk of Scotland voting for independence.”

 

http://www.bloomberg.com/news/2014-09-07/pound-in-peril-as-opinion-poll-puts-scottish-separatists-ahead.html

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  • History : 6 September 2011 : Swiss National Bank acts to weaken strong franc
    71
    The Swiss National Bank (SNB) has set a minimum exchange rate of 1.20 francs to the euro, saying the current value of the franc is a threat to the economy. http://www.bbc.com/news/business-14801324 "The Japanese example with yen intervention teaches us that intervention can work in the very short term but changing…
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  • How Sweden fights inequality: not by taxing the rich
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Economy, Europe

Everything we thought we knew about the economy was wrong

“There are no facts, only interpretations”, Friedrich Nietzsche once said. One needn’t be a nihilist or a relativist to be bemused at the latest radical rewriting of history from our official number-crunchers. Everything we thought we knew about the British economy’s performance over the past 15 years or so now turns out to be wrong. Endless articles, books and academic papers have become worthless at the stroke of the statisticians’ pen.

The reason, needless to say, is that the rules have changed, yet again. The way the national accounts, the GDP statistics and the rest are calculated has been torn up. International statisticians are making a greater effort at including the output of the sex and illegal drug industries and of charities; they are also changing the way research and development and elements of defence spending are accounted for.

The implications from all of this are huge. The peak-to-trough collapse in output as a result of what has been called the Great Recession has been substantially reduced: GDP collapsed by 6pc, not the 7.2pc previously thought. That is still a very big drop, of course, but it is now almost identical to the recession of the early 1980s, when GDP fell by 5.9pc as Lady Thatcher sought to wean Britain from its high inflation

http://www.telegraph.co.uk/finance/economics/11073744/Everything-we-thought-we-knew-about-the-economy-was-wrong.html

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BOE, Central Bank, ECB, Europe, FED, USA

Reminder :: Quantitative easing alone will not do the trick

Very low inflation poses a mounting threat to the economic stability of the eurozone. The rate of consumer price inflation has been below 1 per cent since October, and hence far below the European Central Bank’s (ECB) target of just below 2 per cent. This highlights the degree of weakness in the eurozone economy – and reinforces it – notwithstanding the optimism generated by a return to modest growth. And it further increases doubts over debt sustainability across the currency union: without a healthy dose of inflation, it is much harder for households, firms and governments to reduce their debt burdens.  To make things worse, in the most indebted countries, such as Greece, Portugal, Spain and Italy, inflation is even lower than the eurozone average. In response, many observers argue that the ECB should employ unconventional tools like quantitative easing (QE) to boost inflation. The problem is that QE alone is unlikely to be effective without a significant change in the ECB’s approach to monetary policy. The ECB needs to manage people’s expectations about the future path of demand, income and inflation more forcefully if it is to generate a proper economic recovery across the Eurozone. 

 

See more at: http://www.cer.org.uk/insights/quantitative-easing-alone-will-not-do-trick#sthash.00rBSkSf.dpuf

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Central Bank, ECB, Europe, FED, USA

Jackson Hole Guide: Investors Seek Yellen Job-Market View

Here’s what to look for from the Federal Reserve Bank of Kansas City’s annual economic symposium in Jackson Hole,Wyoming, which runs Aug. 21-23.

— Yellen’s keynote: The highlight will be Fed Chair Janet Yellen’s speech Aug. 22 on labor markets at 10 a.m. New York time. She’ll probably reiterate the Fed’s view that there is plenty of room for improvement in the labor market, according to Dean Maki, chief U.S. economist at Barclays Plc in New York.

— In July, the Federal Open Market Committee changed the language of its policy statement to highlight “significant underutilization of labor resources” as a justification for continued easy-money policies, even though the unemployment rate has fallen faster than Fed officials had forecast. The Fed chief will probably “point to measures like the elevated number of workers that are employed part time for economic reasons as evidence” of continued slack, Maki said.

— Yellen “would like to move away from this being a market-moving policy speech and get it back to being more of an academic exercise,” said Michelle Girard, chief U.S. economist at RBS Securities Inc. in Stamford,Connecticut. “I don’t think that she will use this as a tool to signal anything in terms of the Fed’s thinking, or certainly any meaningful change in the Fed’s thinking.”

— Wage focus: Tepid growth in wages is one area Yellen could choose to explore in more detail if she wants to advance the conversation, said Ethan Harris, co-head of global economics research at Bank of America Corp. in New York.

Stagnant Wages

— Average hourly earnings rose 2 percent in July from the year before, matching the mean increase over the past five years and down from 3.1 percent in the year ended December 2007, Labor Department data showed in the latest employment report. Separately, the employment cost index, a measure of labor cost changes, advanced 2 percent in June from the previous year.

— “A more careful look at wages would be a good place for her to plow some new ground,” Harris said. “They are way too weak, no sign of improvement, and if you’re going to defend why the Fed is going so slowly here, that’s your exhibit A: slow wage growth.”

— Conference participants will be mostly academics and central bankers; economists from major Wall Street banks weren’t invited this year.

— Draghi’s outlook: European Central Bank President Mario Draghi will follow Yellen with the keynote luncheon address. Investors will be seeking further insights into how weak his 18-nation economy is and whether he’s more likely to deploy Fed-style quantitative easing that the ECB has resisted.

Europe Stalls

— The euro area unexpectedly stalled in the second quarter as its three biggest economies failed to grow, adding to the region’s deflation risks. Draghi already committed this month to intensifying the unprecedented stimulus he unveiled in June if the outlook deteriorates.

— Draghi’s challenge may be compounded if Yellen remains focused on boosting the U.S. labor market, according to Alberto Gallo, head of macro credit research at Royal Bank of Scotland Group Plc in London. That’s because her bias toward continued stimulus will keep the dollar weak against the euro.

— Draghi “has tried to push down the euro and has so far won little ground against the dollar,” Gallo said. “The ECB is under even more pressure to do more.”

— Structural woes: Panel discussions on labor-market research presented at the conference may reveal “a growing awareness that underutilized labor resources may be a more permanent fixture,” rather than a cyclical shift, said Eric Green, global head of foreign exchange and rates at TD Securities USA LLC in New York.

‘Hawkish’ Tone

More here : http://www.bloomberg.com/news/2014-08-20/jackson-hole-guide-investors-seek-yellen-job-market-view.html

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ECB, Economy, Europe, FED

Why Currencies Are Poised for More Shifts

The world’s major currencies, which had traded in a relatively stable range, are now in motion — buffeted by different regional growth and interest rates as well as a simmering brew of geopolitical tensions.

Differences are particularly noticeable between the U.S. and Europe, and how far apart currencies in those regions move will be a function of monetary policy at the European Central Bank (while the ECBmeets this week, its major policy actions are likely to come in autumn).

Last week’s economic data confirmed that the euro area and the U.S. are on quite different growth trajectories. Their banking systems are also in different stages of healing. The U.S. is growing faster and mending more quickly, so we should expect a widening diversion in monetary policies. Look for a gradually less accommodating Federal Reserve while the ECB seeks to further loosen its monetary and credit policies. In short, the dollar should continue to appreciate against the euro.

Geopolitical factors also favor a stronger dollar, largely because Europe is more economically and financially exposed to developments in Ukraine and the Middle East than the U.S. Moreover, the euro once enjoyed support from global traders chasing yields on peripheral euro-zone bonds — but there is less capital at work in that realm now.

Read more here : http://www.bloombergview.com/articles/2014-08-04/why-currencies-are-poised-for-more-shifts

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Economy, Europe, USA

French finance minister blasts USD dominance

After the U.S. imposed a fine of US$9 billion on BNP Paribas as the latter had helped countries like Sudan to avoid sanctions launched by the U.S., French finance minister Michel Sapin appealed that rebalancing of currencies used in international payments is possible and necessary; BNP’s punishment case should raise the awareness of all nations that it is necessary to use various currencies, Financial Times reported. 

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ECB, Europe, FED

Important week for Euro

The European Central Bank announced some measures to ease monetary policy two weeks ago. The euro had been on a downtrend since May and by these measures the ECB increased its support to the economy.

The result?

Two weeks later, EUR/USD stabilized just above 1.35.

This week’s Eurozone economic calendar will be an important test for the euro because investors will be watching to the data in order to give confirmation on the need for additional easing.

Economists are not expecting major changes in economic activity but after the plunge in investor confidence (ZEW survey), the risk is a big disadvantage of these reports.

The rate of the EUR/USD will depend mostly on Eurozone data because the U.S. economic calendar is busy with Tier 2 economic reports. The Fed needs will probably start talking about normalizing monetary policy in September, when the central bank updates its forecasts and Janet Yellen gives a press conference.

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Europe, NoTrading, Startup, trend

Klarna is the next big thing in Internet payments

PayPal revolutionized the way we buy things online, but Klarna is the next big thing in Internet payments, according to famed venture capitalist Michael Moritz.

Moritz made early investments in Google (GOOGL, Tech30), LinkedIn (LNKD, Tech30),Yahoo (YHOO, Tech30) and eBay’s (EBAY, Tech30) PayPal. His firm, Sequoia Capital, has been investing millions in Klarna over the past few years. He is impressed with how the Swedish company’s technology makes online transactions easier, cutting out passwords and the traditionally slow registration process.

“We’ve invested in payments for a good long time and had started doing that in the 1990s,” Moritz told CNNMoney. “We had been an early investor in PayPal. But that was a long time ago. That was almost 15 years ago now. And the world moves on and changes, particularly with the advent of mobile computing … there’s a vast new landscape to conquer.”

http://money.cnn.com/

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ECB, Economy, Europe

Some clue how to trade ECB news 5-Jun-2014

The following are the key points in Goldman Sachs note on the ECB meeting today

1- The rate decision will be announced at 12:45 London time. Given that a deposit cut was telegraphed a month ago, the main question is whether this decision will be in line with market consensus (a 10-15bp cut) or greater (say 20bp). In the former, we expect EUR/$ to be essentially flat into the start of the press conference at 13:30, while the latter could see the cross fall around a big figure into the start of the press conference. 

2- The next stop is the opening statement, which ECB President Draghi will read out during the early minutes of the press conference. This will broadcast what credit easing measures will be taken and reveal the latest inflation forecast. On the former, the strongest signal for EUR/$ downside would come if the ECB gives a headline number for the liquidity impact of credit easing (something like “…the combined measures are ultimately expected to inject EUR200bn in liquidity), while the least favourable scenario is a kind of “rolling” LTRO, for example where banks can get liquidity for new lending every six months. The latter example would likely be a disappointment to the market, taking EUR/$ higher by a big figure or two, while the former could see EUR/$ weaken another big figure or two (especially if credit easing surprises the market, i.e., a 4-year LTRO with broad collateral and favourable haircuts or larger-than-expected ABS purchases). 

3. In FX strategy, the single most important node in tomorrow’s decision tree is the inflation forecast, specifically that for outlying years. If the 2016 forecast is marked down to 1.3% or 1.4%, this would be a de facto strengthening of the ECB’s easing bias, since it would openly acknowledge that further easing measures are needed to bring inflation back to target. We see this as the strongest possible signal for EUR/$ downside, since it subsumes many different kinds of future easing, including Fed-style QE. We think this could take EUR /$ down another big figure or more, as the market updates its reaction function for the ECB. If instead the inflation forecast is left unchanged in the context of a reluctant easing, this will set the stage for EUR/$ to move back up to 1.39. 6. There is obviously lots of ambiguity in all this.

4- A lot will hang on wording, demeanor and emphasis, where there are many shades of grey. However, our basic view remains that the ECB will surprise on the dovish side tomorrow, given the drop in core inflation and the signal sent at the last meeting. 

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    78
    A number of changes have been taken or proposed as a result of the financial crisis of August 2007 and the “Great Recession” that are worth discussing in terms of the euro crisis. Most important, though, are the changes of the period between late 2011 and 2012: strict budget rules,…
    Tags: ecb, meeting, europe, economy
  • The European Debt Crisis Visualized
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    The European Debt Crisis Visualized http://www.bloomberg.com/
    Tags: europe, economy
  • If Greece defaults on IMF? then ...
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    Greece could take a risky step into the unknown tomorrow if it misses, as expected, a 1.5 billion euro debt payment to the International Monetary Fund. For the moment, credit rating agencies though would not declare Greece officially "in default" on its debt, because the missed payment is to an…
    Tags: will, tomorrow, economy, ecb
  • Greece’s Debt Due: What Greece Owes When
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    Facing a cash crunch, Greece is seeking to extend its bailout program with eurozone creditors before it expires on Feb. 28. Here’s what Greece owes, when.   Source : http://graphics.wsj.com/greece-debt-timeline/
    Tags: europe, ecb
  • Why Currencies Are Poised for More Shifts
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    The world’s major currencies, which had traded in a relatively stable range, are now in motion -- buffeted by different regional growth and interest rates as well as a simmering brew of geopolitical tensions. Differences are particularly noticeable between the U.S. and Europe, and how far apart currencies in those…
    Tags: europe, ecb, credit, will, economy