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  • #401
  • Aug 10, 2011 6:36am Aug 10, 2011 6:36am
Deffinitly looking like the jpy is about to slip as trizzle has anticipated
  • #402
  • Aug 11, 2011 4:55am Aug 11, 2011 4:55am
Quoting The Cheetah
Bug, thanks for this insightful, and thought-provoking analysis. The BOJ seemed to almost announce when they were going to intervene. After reading your analysis, it really does look like a tip off.
Thanks. In fact they usually prepare the market for intervention several days in advance. Just look at the previous two interventions - before actually going through with it, they did a lot of verbal intervention. Some say verbal intervention is like firing plastic bullets, but I interpret it differently. I think verbal intervention is a vital part of the actual fx intervention as it scares away some of the crowd who is interested in selling XXXJPY. This crowd removes some of their pending sell orders out of fear. What they are really doing is giving the MOF/BOJ more buying power, more bang for the buck so to speak. Since there is less interest in selling XXXJPY, it is easier for the Japanese officials to push the price up. Once it's clear to market participants (at least the pros) that the intervention thread has passed, they resume selling XXXJPY.

Quoting newyear498
I have a feeling this was more of a long term thing.. basically overpriced cars for the rest of the market.. but the way you put it.. I suppose they did get a chance to hedge it and can continue to offer car/products for affordable prices in foreign markets
Cheap cars, cheap auto parts....what more could you want? And it's all at the expense of Japanese tax payers (who ultimately bear the MOF/BOJ losses).
Quoting newyear498
Hmm.. good insights
Thanks.

Quoting newyear498
On the side note.. this market is awesome in its dynamics and changing environment.. I also just had an interview for a prop firm who said there very interested in hiring me.. just loving life right now
Congratulations!
If you don't risk, you don't ever have to lose.
  • #403
  • Aug 11, 2011 5:15am Aug 11, 2011 5:15am
Here's my take on the FOMC decision.

Instead of increasing its Large Scale Asset Purchases (LSAP) as some market commentators were expecting, the Fed has decided to keep rates at zero for at least the next two years. Initial market reactions notwithstanding, I think this was an important (not to be confused with good) move that will have big consequences for the dollar. Before I get to the dollar, here are some of the main takeaway points as I see them:

1. The Fed promised to keep rates below 0.25% for AT LEAST two more years. This is risk free money for banks and institutional investors provided they can find something that yields more than a quarter of a percent.
2. By not purchasing more assets the Fed has not taken on any additional risk to its balance sheet.
3. QE2 was heavily criticized by the media, by some domestic politicians, foreign politicians and foreign officials (China in particular). It even attracted negative comments from current and former Fed members. By not going forward with another round of asset purchases, at least not yet, the Fed will most likely not be criticized, at least not to the extent it would have if it had opted to go forward with QE3. Moreover, setting short term interest rates is a key policy tool of every independent central bank so it would be far-fetched to call this an 'exceptional measure' as long as the economy remains weak, at least.
4. This move also had the positive side effect of avoiding liquidation risk further down the road. When an entity become a big holder of certain assets its liquidation efforts will increase supply to the market, thus pushing down prices.
5. The pledge to keep rates low can easily be revoked if the economy improves to the extent that higher interest rates are needed to fend off inflation.
6. Last but not least, the Fed also avoided debt monetization.

This means free money for banks and other institutional investors who have the access to financing at rates at or slightly above the Fed funds rate. By promising to keep rates at zero for at least two years, the Fed is essentially guaranteeing investors an income provided they can find deals or assets that yield more than 0%. By providing such guidance the Fed has essentially guaranteed that short term Treasury yields will stay below the Federal funds rate for the foreseeable future. One could even say that the Fed has managed to push investors into doing QE3 all by themselves via the Fed-Treasury carry trade.

With all that being said, the Fed's decision isn't anything new in a sense. The markets have already priced in exceptionally low rates into the foreseeable future. The question that remains is whether the markets were expecting rates to stay that low for another two years. If so, this move doesn't provide any additional easing effect. If the markets were expecting rates to stay that low for less than two years we might see a reaction. Since the Fed did not shower the markets with promises to purchase more assets, I think the Fed thought the market was expecting rates to stay below 0.25% for less than two years. However, if economic conditions do not improve the Fed could go ahead with another round of asset purchases. Their rhetoric tells me QE3 is highly dependent on inflation expectations falling from current levels so if we see that the probability for QE3 will rise markedly. It is important to remember that the Fed is not in the business of micromanaging the markets and a further fall in equity markets without falling inflation expectations isn't enough to provoke the Fed into acting.

Dollar
If Asian, Latin American and Middle Eastern central banks interpret the extension of ZIRP as significant easingwe might well see another rush out of the dollar. Central banks in emerging economies are deeply worried about inflation and the prospects of importing even more inflation from the US should raise a lot of concern. The winners are likely to be EUR, GBP, CAD, AUD, NZD, JPY, CHF, NOK, SEK. Central banks will most likely be seen buying on dips. Of course, everything that's priced in dollars from gold and oil to US equities and agricultural goods will see their prices increase. If not now, then after some sort of correction certainly. If the Fed goes ahead with QE3, all of the above-mentioned effects will materialize.

Market reaction
The initial market reaction seems to be a mix of two things:
1. Carry trade unwinds. The USD has been used to fund risky bets and an unwind (forced liquidation especially) would be a good explanation to the current gains in the dollar.
2. Risk aversion 'extrapolation style'. Market participants seem to be extrapolating recent weak figures in the US and Europe.
I haven't got the slightest idea which one of those two themes is dominating right now. However, if it's the first then we should see the USD consolidate gains and begin weakening again. However, if it's the latter we might see more dollar strength, especially on the euro side where investors are not sure of the survival of the EMU.

Even if we see the dollar strengthening from current levels I can't see risk aversion and an unwind in carry trades having any meaningful impact on the long term trend of the USD.
If you don't risk, you don't ever have to lose.
  • #404
  • Aug 11, 2011 5:17am Aug 11, 2011 5:17am
EUROPE
The EU still hasn't managed to solve its debt issues and the SMP is still to small to have an impact. The emergency buying offered some relief of Monday and Tuesday, but the interest to offload bonds looks to be greater than the ECB's willingness to buy them. S&P did offer some relief Wednesday when it said “US, France indebtedness ratios similar, but fiscal flows better in France, deficit not as high” and “French govt has more seriousness in addressing fiscal issues” than US (http://www.forexlive.com/blog/2011/0...is-no-as-high/). This I think should put a ceiling above French bond and credit spreads (compared to Germany). Italy and Spain are still vulnerable, though.

Swiss franc
From Reuters: Swiss eye more steps to quell franc rise

Aug 11 (Reuters) - The Swiss National Bank could ease monetary policy further without having to resort to currency interventions to counter a soaring franc, Vice Chairman Thomas Jordan was quoted as saying on Thursday, as investors speculated over the bank's next move. Analysts say the bank could be leaning towards the imposition of negative interest rates -- forcing banks to charge clients to hold their money -- something Switzerland last saw in the 1970s and which was used more recently by Japan.
/.../
Swiss interest rate futures crossed the 100.0 mark which shows investors pricing in negative returns for the first time ever on Wednesday, partially thanks to the SNB's provision of extra liquidity.
/.../
"The overall CHF pricing depends significantly on perception of fear in the Macro environment and not small interest rate differential gains or losses," said Swissquote chief currency analyst Peter Rosenstreich. "Should the US or Europe trigger another round of safe haven flow the marginal deposit fee will not deter investors from accumulating CHF."

Unless the world's equity and commodity markets run for cover once again these steps could stabilize the franc at current levels and maybe even push the franc down to some extent. However, introducing negative interest rates will not be enough if risk aversion returns. The simple fact is that investors who are buying francs for EUR, AUD and NZD are already facing negative rollever rates. If you take a look at EURCHF, AUDCHF and NZDCHF it is obvious that people don't care much for the negative interest rates. For USD, GBP and JPY it's a bit different because the interest rate differential is relatively small, but there's no reason to think why a small daily swap should convince investors to shy away from buying the franc.
If you don't risk, you don't ever have to lose.
  • #405
  • Aug 11, 2011 6:56am Aug 11, 2011 6:56am
Quoting The Cheetah
I think that gold might unwind due to margin calls in other markets. Perhaps, if the equity market continues to fall, or if we see some of the carry trade currencies tank, it might provide the opening that you are looking for.

Actually, I wonder if the recent decline in oil prices coupled with the increased margin requirements might come into play here.
Heya TheCheetah,

What would be really nice is if Oil begins to rise in anticipation of QE3, and then at the Jackson Hole Symposium The Bernanke makes not even the slightest mention of the LSAP program. The shock in Oil would definitely bring about position squaring in other markets, and with recently increased XAU/USD margins, it may provide at least a short-term short. But for the shock to have its effect, I need to see QE3 anticipations being priced in, and so I will play very close attention to the commodities markets.

Quoting newyear498
I have a feeling this was more of a long term thing.. basically overpriced cars for the rest of the market.. but the way you put it.. I suppose they did get a chance to hedge it and can continue to offer car/products for affordable prices in foreign markets

Hmm.. good insights


On the side note.. this market is awesome in its dynamics and changing environment.. I also just had an interview for a prop firm who said there very interested in hiring me.. just loving life right now
Congrats man. The dynamics ensure that there are always trades on the horizon. Sometimes it's even better than watching TV..

Quoting newyear498
Deffinitly looking like the jpy is about to slip as trizzle has anticipated
She's being a stubborn mistress at the moment but she'll come around!

Regards,
xXTrizzleXx
  • #406
  • Aug 11, 2011 7:12am Aug 11, 2011 7:12am
Quoting bug
Here's my take on the FOMC decision.

Instead of increasing its Large Scale Asset Purchases (LSAP) as some market commentators were expecting, the Fed has decided to keep rates at zero for at least the next two years. Initial market reactions notwithstanding, I think this was an important (not to be confused with good) move that will have big consequences for the dollar. Before I get to the dollar, here are some of the main takeaway points as I see them:

1. The Fed promised to keep rates below 0.25% for AT LEAST two more years. This...
I agree with this strongly, and although unconventional it seems like the Fed has instituted somewhat of a QE 2.5, with the added bonus of not having to increase its balance sheet. I also don't see the need for this to be touted as an 'exceptional' method..unusual maybe..but not 'exceptional'.

Quote
With all that being said, the Fed's decision isn't anything new in a sense. The markets have already priced in exceptionally low rates into the foreseeable future. The question that remains is whether the markets were expecting rates to stay that low for another two years. If so, this move doesn't provide any additional easing effect. If the markets were expecting rates to stay that low for less than two years we might see a reaction. Since the Fed did not shower the markets with promises to purchase more assets, [b]I think the Fed...
From what I was reading, the interest rate markets were pricing in rate hike actions in 2012, so I think the Fed did surprise them somewhat with that policy move. Inflation will definitely be a key indicator to keep an eye on, for if it proves resilient yet the market's calls for additional easing remain steadfast, we may see a lovely trade unfold. The last statement in italics is very important, and I think many of the pundits seem to neglect the importance of inflation in the Fed's decisions.

Quote
Dollar
If Asian, Latin American and Middle Eastern central banks interpret the extension of ZIRP as significant easingwe might well see another rush out of the dollar. Central banks in emerging economies are deeply worried about inflation and the prospects of importing even more inflation from the US should raise a lot of concern. The winners are likely to be EUR, GBP, CAD, AUD, NZD, JPY, CHF, NOK, SEK. Central banks will most likely be seen buying on dips. Of course, everything that's priced in dollars from gold and oil to US equities and...
I agree that it will certainly favor risk on and further diversification flows out of the dollar (which are already proving to be quite a force to contend with might I add), but if the fall-out from Europe exacerbates then that risk may be swallowed by a flight to safety. The sovereign debt issue remains a key wild card in this scenario.

Quote
Market reaction
The initial market reaction seems to be a mix of two things:
1. Carry trade unwinds. The USD has been used to fund risky bets and an unwind (forced liquidation especially) would be a good explanation to the current gains in the dollar.
2. Risk aversion 'extrapolation style'. Market participants seem to be extrapolating recent weak figures in the US and Europe.
I haven't got the slightest idea which one of those two themes is dominating right now. However, if it's the first then we should see the USD consolidate gains...
Good outlook!

Quoting bug
EUROPE
The EU still hasn't managed to solve its debt issues and the SMP is still to small to have an impact. The emergency buying offered some relief of Monday and Tuesday, but the interest to offload bonds looks to be greater than the ECB's willingness to buy them. S&P did offer some relief Wednesday when it said “US, France indebtedness ratios similar, but fiscal flows better in France, deficit not as high” and “French govt has more seriousness in addressing fiscal issues” than US (http://www.forexlive.com/blog/2011/0...is-no-as-high/)....
Regarding the bold highlighting, I actually see a material risk in the EFSF not being expanded sufficiently enough to have the debt offloaded on to it and then to act on the secondary markets, due to political pressuring. If that's the case, then the ECB will be stuck with the toxic bonds on it's balance sheet unless they can pull another 'solution' out of their hats. It will also be interesting to note the direction the ECB takes when Trichet makes way for Draghi.

Quote
Swiss franc
From Reuters: Swiss eye more steps to quell franc rise[indent][i]Aug 11 (Reuters) - The Swiss National Bank could ease monetary policy further without having to resort to currency interventions to counter a soaring franc, Vice Chairman Thomas Jordan was quoted as saying on Thursday, as investors speculated over the bank's next move. Analysts say the bank could be leaning towards the imposition of negative interest rates --...
It makes me chuckle when they think that their slightly negative interest rates has any effect on a trade like AUD/CHF. However, there was recent intervention in the forward market I believe, and this has looked to provide some downward pressure on the franc, at least for now. SNB's Jordan was also jawboning about the possibility of a Euro-Franc peg, which I call BS on, as there were already legitimate concerns that doing so would cede the SNB's monetary autonomy. But as opposed to the previous few weeks, USD/CHF and EUR/CHF seem to be rather dead to me, especially with the recent trouble with European Banks, I'd have thought it would have sparked some flows into them. Guess I'll have to wait for a new development in the saga to give these pairs the impetus to move.

Regards,
xXTrizzleXx
  • #407
  • Aug 11, 2011 7:16am Aug 11, 2011 7:16am
My USD/CHF short was stopped out today via trailing stop due to heightened activity by the SNB...I knew they were too quiet! It would be funny if the BoJ decided to follow suit. The profits however, were quite tidy, so I'm not too muddled by the outcome of this trade, even though I wanted to hit 0.7000.

My only position now is on AUD/USD, a risk-free short. The sentiment on this pair feels like it has a strong sell-rally mentality, and with the unemployment rate cruising to 5.1%, above the RBA's 5% inflationary level, it would seem to me that it would further bolster the prospects for a rate cut in this uncertain climate. What stands in my way is the reserve managers around parity, who look to be putting a floor to the recent downmove. I may TP around here if they seem to be out in force.

Regards,
xXTrizzleXx
Attached Images
  • #408
  • Aug 11, 2011 7:30am Aug 11, 2011 7:30am
Since my previous post the SNB had decided to intervene, or at least that's what they say. There is talk out there of intervention in the forwards markets, but none of it comes from trustworthy sources (twitter feed is not a trustworthy source, nor is Reuters when it comes to intervention). I would like to see the SNB's statement. So far they have declined to comment.

There is also talk out there that the Swiss would like to peg the franc to the euro. While it may seem like a credible solution to some, I can't see it happening without the help of the ECB. Going from a floating to a pegging rate with the aim of floating again in the future would be a very difficult and expensive endeavor, at least when done without outside help (ECB).
If you don't risk, you don't ever have to lose.
  • #409
  • Aug 11, 2011 7:53am Aug 11, 2011 7:53am
Quoting xXTrizzleXx
My USD/CHF short was stopped out today via trailing stop due to heightened activity by the SNB...I knew they were too quiet! It would be funny if the BoJ decided to follow suit. The profits however, were quite tidy, so I'm not too muddled by the outcome of this trade, even though I wanted to hit 0.7000.

My only position now is on AUD/USD, a risk-free short. The sentiment on this pair feels like it has a strong sell-rally mentality, and with the unemployment rate cruising to 5.1%, above the RBA's 5% inflationary level, it would seem to me that...
Yes I had some fun with the CHF took over 230 pips today with it

I also captured the big EUR fail yesterday for over 100 and played the opposite side of that trade today for 40 pips

to include some loses my largest was 100 pips on the USD/CAD I felt the cad had some strength to gain but she took me out and then humiliated me by making a large move in strength


overall a great week for profits now going camping so have a good friday/weekend to you guys!!!
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  • #410
  • Aug 11, 2011 1:20pm Aug 11, 2011 1:20pm
Quoting bug
Since my previous post the SNB had decided to intervene, or at least that's what they say. There is talk out there of intervention in the forwards markets, but none of it comes from trustworthy sources (twitter feed is not a trustworthy source, nor is Reuters when it comes to intervention). I would like to see the SNB's statement. So far they have declined to comment.

There is also talk out there that the Swiss would like to peg the franc to the euro. While it may seem like a credible solution to some, I can't see it happening without the help...
I think the "peg comment" shows that how much desperate and trapped SNB is.

How can they peg CHF at the such levels That are already hurting the economy big time. It makes no sense, does it?

BTFD. lol
.
  • #411
  • Aug 11, 2011 8:24pm Aug 11, 2011 8:24pm
With a quite Euro session and its attractive high interest rate, looks like its hard to keep the AUD and NZD down. AUD still looks bearish though with upcoming high possibility of interest rate cut next month.

Looks like we had unwinding of the shorts in the CHF, it ranged the whole 3 sessions on the 10th and Tokyo session on the 11th, even though we had the French bank drama on the 10th which saw the EURO dropped 200+ pips.

Just my thoughts guys, keep up the good work on the thread
  • #412
  • Aug 13, 2011 3:50am Aug 13, 2011 3:50am
Federal Reserve and monetary easing
I did some reading and as always, I found something interesting from Scott Grannis' blog. Below is an excerpt from on of his recent posts on the Fed. I have also added a chart from his blog below (expected inflation vs 3-10 spread).

CBP: More thoughts on the FOMC's new policy

QE2 didn't have any immediate effect on the economy or on the money supply, because banks decided to hold on to the extra reserves the Fed dumped into the banking system, but it probably helped weaken the dollar. But now, the promise of two years or more of super-low funding costs will almost certainly galvanize the banking industry and the institutional investment community. Banks stand to make handsome profits with an outsized and semi-permanent gap between their funding costs and their loan portfolio, and they can even make hay by buying Treasury notes and bonds, since the Fed is basically guaranteeing that the yield curve will be positively sloped for at least two years. Institutional investors can borrow at rates only slightly higher than the funds rate, and use the proceeds to leverage themselves into a variety of attractive situations—anything that promises to yield more than 1% or so.

ZIRP4EVA = deflation?
In normal economic times, low borrowing rates will encourage people and businesses to go into debt. However, these are not normal times - fed funds rates have been floored and there are not enough high yielding investments (in this environment, even 2% is high). So even though the Fed would like to believe that extending the ZIRP policy into mid-2013 constitutes monetary easing, it could turn out to have a tightening effect. If rates are too low the lenders don't have any incentive to lend - the rate they get is not enough to justify the risks involved, especially when there are so few creditworthy borrowers. We have already seen a few signs of this happening - BNY charging interest on deposits, banks sitting on cash* and problems in the repo market - these are all signs of tight money and a lack of liquidity. This is perverse because the market is flooded with cash. The problem is that everyone is holding on to their cash, thus = lack of liquidity.

This is all very reminiscent of Japan. ZIRP, low to non-existent GDP growth, falling asset prices, ballooning govt debt. There are just two things that are different in the US - the unemployment rate is much higher and there is (at least not now) no deflation.

If banks refuse to lend due to counterparty risk and too low rates the economy could in theory grind to a complete halt, bringing about deflation. On the other hand, excessive lending and speculation would push up inflation, but that bubble would be popped once the Fed normalizes policy in 20XX. I would like to say that I know which way the US is headed, but right now I'm very confused.

*Some say that by buying up a huge chunk of government debt, the Fed has left the banks out in the cold - they're sitting on cash with no income except for the paltry 0.25% they get from IOER. Even euro deposits yield more than that!

Swiss franc
READ this: Swiss to Join the EU – NOT!

Budget 'cuts'
Remember when I previously said that politicians weren't really planning any cuts, only looking to decrease the rate at which the spending increases? Well, the reason I said so was because I have been watching the UK budget deficit and public spending figures and they're not indicating any real cuts. I also managed to find Scott Grannis' take on US 'cuts':

Note to would-be optimists: the recently concluded budget deal would allow for spending to rise by at least 4-5% per year going forward (contrary to press reports, nobody was ever talking about actually cutting spending).
Nobody is proposing actual spending cuts.
See this post for more details.


----------------------------------------------

http://2.bp.blogspot.com/-afZ5NqhPhG...+Inflation.jpg
If you don't risk, you don't ever have to lose.
  • #413
  • Aug 13, 2011 7:30am Aug 13, 2011 7:30am
Quoting bug
[b] I found something interesting from Scott Grannis' blog. Below is an excerpt from on of his recent posts on the Fed.

Bug, thanks for posting this. I have been meaning to check this blog out.

I am not sure of the potential implications of this, but it is something worth trying to think through.

Here are some thoughts and a link that I shared in my journal. It is related to how U.S. Treasury Bills have impacted the banking system. Since the FDIC insurance only covers the first $250,000 of deposited funds, big money players have essentially began using T-bills as savings accounts.

"What's driving all of the interest in US Treasury bills even though the 3-month yield is down to .01%?

Here's an interesting take from the Financial Times: 'From an investment perspective, these returns may seem crazy; but they are still attractive to cash managers because T-bills are liquid – and, most crucially, seem less risky than uninsured bank deposits. Or, put another way, faced with a choice between betting on the safety of the US government, or its banks, cash-rich large companies and asset managers are choosing the former. It is an entirely rational choice. But it is also a powerful reminder of how profoundly distorted the US financial system remains. And that is not a comforting thought; least of all in a rollercoaster week.'" (LINK)

Certainly, T-bills are a safe haven choice, but it also looks like this development might keep more and more money out of the banking system.
  • #414
  • Aug 15, 2011 6:49am Aug 15, 2011 6:49am
Quoting The Cheetah
Bug, thanks for posting this. I have been meaning to check this blog out.
You're welcome. I've been following his blog for about a year now and I can only say good things about it. I find his blog very useful due to the focus on the bond market. This is something that I've not seen elsewhere and I find it very useful - I find myself saving his posts on my hard drive quite often.
Quote
Since the FDIC insurance only covers the first $250,000 of deposited funds, big money players have essentially began using T-bills as savings accounts.
Wow. I haven't thought about that! Thanks for bringing it up.

Quote
Certainly, T-bills are a safe haven choice, but it also looks like this development might keep more and more money out of the banking system.
This is something that I find myself thinking about as well. The Fed has driven the funds rate so low that if banks sense blood in the markets, they will simply refuse to play their part in the interbank market. The yield is simply too low to justify taking on counterparty risk. Another interesting observation is that by buying up such a big part of the Treasury market, the Fed has left banks without quality collateral. This only serves to introduce more stress and uncertainty to the interbank funding market.
If you don't risk, you don't ever have to lose.
  • #415
  • Aug 16, 2011 6:32am Aug 16, 2011 6:32am
A lot of brainpower is being spent all around to world to analyze the situation the Swiss franc is in right now. These are the only two articles I've found that are actually worth reading.
http://ftalphaville.ft.com/blog/2011...s-some-pegleg/
http://blogs.wsj.com/source/2011/08/...about-pegging/
If you don't risk, you don't ever have to lose.
  • #416
  • Aug 16, 2011 6:42am Aug 16, 2011 6:42am
Quoting bug
A lot of brainpower is being spent all around to world to analyze the situation the Swiss franc is in right now. These are the only two articles I've found that are actually worth reading.
http://ftalphaville.ft.com/blog/2011...s-some-pegleg/
http://blogs.wsj.com/source/2011/08/...about-pegging/
CHF and JPY losing strength today over Fitch and the US Industrial Production data rating USD "AAA"

who the fuck did US pay off this time
  • #417
  • Aug 16, 2011 6:53am Aug 16, 2011 6:53am
Quoting newyear498
CHF and JPY losing strength today over Fitch and the US Industrial Production data rating USD "AAA"

who the fuck did US pay off this time
Just closed two of these positions.. just trying to protect myself right now otherwise some relief to what looked like was going to be a slow day.
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  • #418
  • Aug 16, 2011 7:36am Aug 16, 2011 7:36am
Quoting newyear498
Just closed two of these positions.. just trying to protect myself right now otherwise some relief to what looked like was going to be a slow day.
Hope you guys are catching some of this..
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  • #419
  • Aug 16, 2011 7:51am Aug 16, 2011 7:51am
Heya guys, sorry for the brief absence. Where to begin:

Quoting bug
Since my previous post the SNB had decided to intervene, or at least that's what they say. There is talk out there of intervention in the forwards markets, but none of it comes from trustworthy sources (twitter feed is not a trustworthy source, nor is Reuters when it comes to intervention). I would like to see the SNB's statement. So far they have declined to comment.

There is also talk out there that the Swiss would like to peg the franc to the euro. While it may seem like a credible solution to some, I can't see it happening without the help...
Quote
A lot of brainpower is being spent all around to world to analyze the situation the Swiss franc is in right now. These are the only two articles I've found that are actually worth reading.
http://ftalphaville.ft.com/blog/2011...s-some-pegleg/
http://blogs.wsj.com/source/2011/08/...about-pegging/
Quoting nasir.khan
I think the "peg comment" shows that how much desperate and trapped SNB is.

How can they peg CHF at the such levels That are already hurting the economy big time. It makes no sense, does it?

BTFD. lol
Although I think it's highly unlikely that they will go ahead and peg to the Euro, especially when the EZ is in the limelight for turmoil, if they do, it merely gives the speculators a target to attack, much like BoJ and the all-time lows at 76.25. The SNB does not have a very good track record when it comes to interventions..could we be seeing another breaking of a central bank on the horizon? If it does get pegged/floored, then it should appease the market, but if the SNB over-promise and under-deliver, they risk seeing the EUR/CHF back at parity quite soon.

Quoting Jonas.fx
With a quite Euro session and its attractive high interest rate, looks like its hard to keep the AUD and NZD down. AUD still looks bearish though with upcoming high possibility of interest rate cut next month.

Looks like we had unwinding of the shorts in the CHF, it ranged the whole 3 sessions on the 10th and Tokyo session on the 11th, even though we had the French bank drama on the 10th which saw the EURO dropped 200+ pips.

Just my thoughts guys, keep up the good work on the thread
Indeed, the AUD and NZD are proving hard to keep down from an interest rate perspective, but there are also reserve managers diversifying into these currencies to get away from the EUR and USD, giving these a boost. Additionally, if inflation in Australia remains resilient, and growth prospects improve, the market will be so mispriced it's not even funny!
  • #420
  • Aug 16, 2011 8:05am Aug 16, 2011 8:05am
Quoting bug
Federal Reserve and monetary easing
I did some reading and as always, I found something interesting from Scott Grannis' blog. Below is an excerpt from on of his recent posts on the Fed. I have also added a chart from his blog below (expected inflation vs 3-10 spread).

CBP: More thoughts on the FOMC's new policy[indent][i]QE2 didn't have any immediate effect on the economy or on the money supply, because banks decided to hold on to the extra reserves...
This has provided me with some interesting ideas from a macro/yield-driven perspective, which I will expound on in my further posts.
Quote
ZIRP4EVA = deflation?
In normal economic times, low borrowing rates will encourage people and businesses to go into debt. However, these are not normal times - fed funds rates have been floored and there are not enough high yielding investments (in this environment, even 2% is high). So even though the Fed would like to believe that extending the ZIRP policy into mid-2013 constitutes monetary easing, it could turn out to have a tightening effect. If rates are too low the lenders don't have any incentive to lend - the rate they...
And if the deflation fear materializes, then the markets would breathe a sigh of relief as the Fed would have amassed enough firepower to reach into its bag and begin a third LSAP program, QE3. I read about the BoNY Mellon charging for deposits too, and that definitely signalled to me that the problem is not of liquidity, it's a lack of incentive to take on risk, which I mostly think is due to the fears about growth prospects and recessionary pressures. As long as these can clear up then I think that will give the green light to funding riskier investments, especially with the Fed's little promise of keeping interest rates low for their explicit timeframe.

Quoting The Cheetah

Here's an interesting take from the Financial Times: 'From an investment perspective, these returns may seem crazy; but they are still attractive to cash managers because T-bills are liquid – and, most crucially, seem less risky than uninsured bank deposits.
A very good observation, and a key reason why investors flock to the US in times of uncertainty, not necessarily because it's a safe haven, but because it's a liquidity haven and the most efficient one liquidity-wise at that - they have nowhere else to go!

Quoting newyear498
Just closed two of these positions.. just trying to protect myself right now otherwise some relief to what looked like was going to be a slow day.
Quoting newyear498
Hope you guys are catching some of this..
Nice trades guy. You have a few that catch my eye.

Regards,
xXTrizzleXx
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