David Long

Holes in the floor like Swiss cheese

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Forex Market News

Go Girl Power

Before I get onto the muppets in Zurich let me briefly highlight the great result we had in Australia.

The jobs data came out and the women ruled. They not only outpaced the men in fulltime jobs but in part time they added to the workforce whilst the men decreased in part time jobs. All in all a contribution of 41K odd fulltime jobs at the end of the year, a time traditionally not known for companies to be increasing their workforce. So, I think a well-deserved rally in the Aussie, and perhaps even further than it got. Until the bloody Swiss intervened.

No wonder they are neutral in times of conflict. Would you be afraid of a soldier who attacks you with a toothpick from a utility knife the size of a baby carrot?

The Swiss

I am livid at Jordan, the head of the SNB. Just a month ago he said the SNB would adamantly defend their floor on the EURCHF. His deputy said it 2 days ago! Whilst I may be livid at his betrayal and lies, there are others out there who would want his head removed from his shoulders. The CHF jumped in value by 14%. So people who have mortgages, export companies and tourism (which is most of the Swiss GDP) all just got more expensive. Not to mention other assets such as the stock market which tanked 10%. A lot of people lost a lot, a big lot of money, on this move.

“A lot of investors got burned so now they’re closing some positions that they were having some profits — we’re seeing that in Canada, in Aussie, in kiwi,” said Charles St-Arnaud, London-based senior economist at Nomura Securities International Inc. “Most investors are taking a step back to reassess their willingness to take risks now. That’s why you see very little liquidity in the market.”

At 9:30 a.m. today, trading floors across the City of London erupted. Outbursts of obscenities and confusion followed the Swiss central bank’s surprise decision to abolish its three-year-old policy of capping the Swiss franc against the euro, according to traders in London’s financial district. The U-turn sent the franc as much as 41 percent up against the euro, the biggest gain on record, a move that one trader estimated may cause billions of dollars of losses for banks and their customers. IG Group said in a statement the SNB’s move will cost the firm as much as 30 million pounds ($46 million).

The SNB has accumulated over 800 billion in assets in defending the floor. Admittedly they would be having to accumulate more Euros if Draghi puts QE in place.  If the SNB need to get out of their balance sheet, they will need to sell euros (that’s a good idea). The CHF has only one reason to rise, you would not be buying or putting money into Swiss banks anymore, not with neg rates at 0.75 and higher for longer term bonds. So, the only reason you would be buying CHF is because the SNB will have to, if and when they decide to liquidate the assets they have on their balance sheets. Considering most of their assets (apart from US$ and gold) are falling that is not likely to be anytime soon.

I have never been a fan of central wankers, but last night I am convinced that they all have their heads up their arses, have little idea of the impact of their actions, complete friggin muppets!

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