Posts tagged 'FX'

Beware randomly falling markets

Evergreen advice here from Citi:

Beware of unexpected outcomes to expected events.

But it’s the accompanying chart that’s worth the click: Read more

The RMB and potential Brexit camouflage

Here’s A repeated theory: Brexit-shenanigans has caused GBP to go nuts. Crashes have flashed, journalists have frenzied, the FX and political worlds have been transfixed. And during this period, China has cynically decided to weaken its currency versus the US dollar while everyone was distracted.

As we said, it’s just A theory but here’s what an accompanying chart might look like, courtesy of CreditSights:

Screen Shot 2016-10-12 at 11.57.28 Read more

GBP, inflation and the BoE, choose your own adventure edition

GBP is falling.

Breakevens are rising.

And Credit Suisse is charting… Read more

Sorry, but the FX market can simply be gappy too

Remember the flash crash?

Screen Shot 2016-10-09 at 10.35.18

Well, it (as opposed to the overall Brexit-inspired fall in GBP) was very probably also a market structure thing. Read more

Why this is more than a flash crash in sterling

This guest post is from Themos Fiotakis, Global Co-Head FX & Rates Strategy, UBS Investment Bank Read more

Breakevens and the Great British Peso

While we’re waiting for everyone to flail through the ocean of FX crash causality, this is worth paying attention to….

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Fat fingered algos [updated]

You’ll have woken up to the flash crash in GBP…


You’ll be aware that the flash crash isn’t the only crash in GBP going on: Read more

Parts of the City of London are in serious decline

Once every three years the Bank of England — working with the BIS — comes out with the results of a survey providing a snapshot of FX and rates trading volumes in London. The latest summary is out. Usually we just gawp a the size of the notional numbers involved and maybe bask in the knowledge that, in this area at least, London comfortably outflanks New York. But not this time. Read more

Finger still in air, GBP forecasting edition

Right, with the warning that we are back in The Forex and nothing is certain, this from HSBC is an unpleasant paragraph for those long the Great British Krona*:

In our view, GBP is the main part of the adjustment mechanism but the adjustment is not over yet. We still see GBP-USD at 1.25 by end of Q3 and 1.20 by year-end. However, we now see GBP weakness extending into 2017 and we now forecast GBP-USD at 1.10 by end-2017. This aligns with our economist’s view that the Bank of England will ease even further, cutting rates by 15bp in November and expanding QE in February next year.

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Back to a low vol FX world?

This is from HSBC’s FX team, they of most fervent RORO use, who basically think that if Brexit, the Turkish coup attempt and the BoJ’s not pulling the trigger as expected didn’t rattle the markets properly then something must be up.

To demonstrate this, they take us back to 2014 when things were in proper (and the fear was indefinite) low vol mode: Read more

Brexit upsides, RMB devaluation edition

Upsides for whom, you ask?

For Chinese policymakers, we respond.

As do Deutsche Bank:

More subtly, Brexit indirectly helped reduce concerns of a ‘risk off’ shock from China thanks to the stealthy RMB devaluation around the UK vote. This has confirmed a new-found market tolerance of China currency slippage, at least when it looks controlled by policymakers.

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Finger in air, GBP forecasting (second) edition

Welcome back to The Forex, where estimates are just that and things can get too mechanistic quickly (do read George Magnus for something more contextual than the below).

From Deutsche’s George Saravelos:

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The Great British Krona and some perspective (it doesn’t help much though)

First, we gotta note that GBP hit a 31-year low against the dollar below $1.28 before coming back in a touch.

You can also look at the pound index here, but expect a similar lack of comfort.

But, to compound the ugliness and the real reason we’re here in this post, some longer term facts from Bank of New York Mellon’s Simon Derrick: Read more

Of vol, GBP and meaningless numbers [updated with some VaR qualification]

H’t to Katie over at Fast for the spot…

Here’s what a volatile DM currency move looks like:

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London, fintech decelerator of the world

On the matter of London’s bid to establish itself as the fintech capital of the world, well known Twitter and blogging raconteur Dan Davies says:

Which fits quite nice with what a fintech/Brexit report commissioned by London FinTech Week at the end of May flagged. Read more

Whispering sweet intervention warnings in Japan

A reminder of the BoJ’s intervention tendencies, from Nomura:

And yes, they really might pull the trigger — what with Y100 against the dollar being broken this morning as Brexit roiled everything — just not quite yet. Read more

Finger in air, GBP forecasting edition

The pound is already down 10 per cent against the dollar, which is totally normal for a developed markets currency pair, but it could get worse.

In summary, you are now entering The Forex and nobody really knows what’s going to happen. That said, for entertainment purposes at the least, have some guesswork from our inboxes.

We’ll add them as we see them… Read more

FX options trading with Sainsbury’s Bank

Please don’t consider any of this financial advice, caveat emptor, etc — seriously, I will grow a beard and flee the country if you ask me to cover whatever charges you end up paying because things didn’t work out in the end.

But, with that disclaimer in place, here’s a sort of risk-free way of trading sterling. Read more

Peak Brexit?

We’d really like to move on now, thanks. Read more

Brexit lessons from Black Wednesday (updated)

Friends, advisors, clients, counterparties: it’s almost over.

By Friday we’ll have emerged from the tyranny of the Brexit campaign into a brave new world where either: a) things will be the same and we’ll still be arguing about it; or b) things will be the same but we’ll be arguing about it in Brussels and maybe there’ll be less immigration, eventually, who knows.

In the meantime, the Civil Service is trying to remember what trade negotiations are like; currency traders are girding their loins for an orgy of volatility; and the FX strategists over at Credit Suisse are looking back to Black Wednesday for clues on just how royally screwed (or Absolutely Fine) we’ll be in the event of a Leave vote and subsequent sterling crash.

Namely, in the event the Bank of England decides to intervene in the currency markets to protect the pound, will it be successful and can it depend on help from the Fed, ECB and BoJ?

First some Black Wednesday history, chartified: Read more

This re-correlated world

ICYMI, RoRo — or risk on/ risk off — is apparently back.

It’s not quite at peak levels but that bane of interesting narrative, that supporter of the yen, that acronym of dubious origin is getting back up there:

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Central bank tightening risk, charted

From BofAML’s FX strategist Athanasios Vamvakidis, do click to enlarge:

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Did the G20 agree a currency accord and does it matter?

The first question is whether there was a lovely new, but secret, currency accord agreed at the G20 in Shanghai in February.

The answer is: Probably not. Read more

Irony and that JPY-equity correlation

Or, pictorially, what’s up with this?

And we mean apart from the whole “hey, we gave you negative rates why aren’t you giving us weaker yen?” thing as we’ve already spread plenty of pixels on a webpage about that.

It’s more about they strong negative correlation between the yen and equities on show in that chart. Read more

JP(wh)Y? revisited. And a break in the currency wars?

This post will be made up of two pieces. The first will try to explain why JPY continues to defy Japan’s negative rate-led demand for currency weakness. The second will add words to this picture from HSBC which proclaims a break in the (so-called, he adds hastily) currency wars, predicated mostly on said JPY strength:

At last sighting JPY was hovering at about Y108. That’s not good if you are the BoJ’s Kuroda or the overarching Abe, particularly because FX strength can beget more FX strength. The question is why did the yen start this slide: Read more


Kuroda et al might want to look away:

That’s the yen being “whacked to the lowest since October 2014” (when the BoJ decided to extend its easing programme) in the words of Citi’s FX team. It’s now under Y109 having been at Y125 in June last year. Also from Citi: Read more

Was a weak euro last year’s necessity?

An important question for anyone who thinks the euro area needs to keep its currency weak to grab foreign demand. Or who thinks that’s what the ECB thinks, anyway.

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Just how volatile will June 23rd be for sterling?

By Giles Wilkes, normally found at Lex or writing leaders.

So on Wednesday 23rd March, three month implied volatility for the proud pound was 14.5 per cent, which is up a third from 11 per cent the day before.

For an options market maker, such a move in ‘vol’ is a pretty big deal: expected volatility in a market is the major factor driving prices, and being caught the wrong way on such a move would be enough to cause a fairly large loss. But that is not what happened.

The reason for the change in three month vol was rather more mundane. Read more

After the G20, FX intervention edition

“I don’t think this is a meeting where there will be some big decision,” said one G20 official who asked not to be identified, presumably not because he fears reprisal from an IMF which advocated a plan “for co-ordinated demand support using available fiscal space to boost public investment and complement structural reforms.”

So that’s probably that for now.

What about the FX bit? Read more

JPY pain, charted and extrapolated

By Nomura first, who are worried that Japan’s economy has taken a dangerous turn — what with GDP dropping at an annualised rate of 1.4 per cent in the fourth quarter and Abenomics being felt for a pulse:

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