January 24th, 2015 13:55:08 GMT.

ECB’s Visco says the ‘D’ word


Bank of Italy Governor Ignazio “Nacho” Visco says there is a risk of deflation in the eurozone.

For the past few years it’s been taboo to talk about deflation at the European Central Bank. The thinking was that if they didn’t mention deflation and dismissed it, that deflationary expectations wouldn’t materialize.

Cryptically, Visco also said ECB QE will favor countries who have made reforms.


January 24th, 2015 12:48:32 GMT.

Canadian mortgage brokers say lower rates a matter of time


Canadian banks haven’t followed the Bank of Canada’s move to lower rates…yet.

But mortgage brokers who spoke to the Globe and Mail say it’s only a matter of time and that it will put another gasp into the Canadian housing market.

“You’ll definitely get more interest in homebuying when you see rates go below 2.5 per cent,” mortgage planner Robert McLister said.


January 24th, 2015 10:32:55 GMT.

ECB’s Mersch says German misgivings over QE are all considered in the small print


Bank of Luxembourg gov and ECB Executive Board member Yves Mersch has given an interview to Neue Osnabruecker Zeitung saying

German reservations are taken into account fully, though perhaps only when you read the small print

Ah, the small print. Of course. Always the small print.

But it’s important too for a number of reasons, not least the ongoing legal issues , and Mersch, focussing on one of Germany’s main worries about the ECB QE plan, said it involved

“no shared liability (for member states’ debts), as would be the case with euro bonds

And yesterday Adam had this on reasons why German oppostion to QE and the Eurozone are “laughable”

I’ll let you, the jury, decide

I’m off to watch the mighty Southend United FC at Portsmouth

Have a great week-end out there wherever it takes you, and thank-you again for all your brillant input and support over what has been a tumultuous ten days in the fickle world of foreign exchange

Mersch - It's all in the small print

Mersch – It’s all in the small print


January 24th, 2015 09:57:44 GMT.

New king set to continue Saudi oil policy but what is to become of the minister?


Yesterday Eamonn had this article from the WSJ and  IEA’s chief economist Birol had this to say, and both fully expect Saudi oil policy to continue under new king Salman bin Abdul Aziz al-Saud.

But what fate awaits the oil minister Ali Al-Naimi, in his post since 1995?  While the new king is not seen as likely to change Abdullah’s policies of keeping output high to protect the OPEC cartel’s market share, some analysts say the succession has focused attention on the future of the oil minister Ali Al-Naimi.

An article from Reuters has this question

It was reported that he (Ali Al-Naimi) expressed a desire to step down, but King Abdullah asked him to stay on for as long as he is around. So, the real question is, if there is a new oil minister soon, will it lead to a change in Saudi energy policy?

If indeed there is to be a change in personnel from the world’s largest oil exporter that in itself lead would lead to more market uncertainty at a time when many analysts are still calling for the price to fall further

A good bit of week-end reading here

Saudi Arabia's Salman bin Abdul Aziz al-Saud set to continue oil policy but what else is in the pipeline?

Saudi Arabia’s Salman bin Abdul Aziz al-Saud set to continue oil policy but what else is in the pipeline?


January 23rd, 2015 22:28:59 GMT.

ForexLive Americas wrap: Euro crashes, CAD bounces


Forex news for January 23, 2015:

The euro was the big loser once again on Friday but most of the damage was done before US traders got in on the action. The final run on stops came just after 7 am ET (noon GMT) and collapsed to 1.1115 but rebounded 60 pips almost immediately. From there it was a steady climb to 1.1289. The dovish headlines from Coeure only caused a 15 pip drop and it climbed higher afterwards. After London shut down some sellers returned in a slow grind to 1.1204.

USD/JPY was caught with the whims of the stock market but the big story was how easily it gave up yesterday’s gains in a slide as low as 117.55. Headlines didn’t have much of an impact.

The only headlines that sparked trading were from Canada on the retail sales report. The strong numbers sank USD/CAD by 70 pips down to 1.2380 in a lightning-fast move. But the dip buyers were waiting and it climbed all the way to 1.2430. Expect those dip buyers to continue buying.

WTI strangely rallied on the Saudi king’s death even though his replacement is more hawkish on supply. The market eventually figured it out and crude’s weekly close was the lowest since 2009. I shared my thoughts on where it’s heading next.

FX ticker

FX ticker

Have a great weekend!


January 23rd, 2015 21:17:23 GMT.

FXCM considers exiting some countries, is seeking negative balances


The Wall Street Journal reports that FXCM is considering sales of non-core assets to help repay the $300 million loan it was forced to accept under distressed conditions last week.

Shares of the company are down 85% since mid-month and declined nearly 30% on Friday.

They said FXCM is “reviewing countries where it offers currency trading, with an eye toward possibly lopping off jurisdictions where capital requirements and other costs are too onerous, one of the people said.”

There is nowhere where capital costs are higher than the US.

The WSJ reports that a leading contender to be sold is FXCM’s minority stake in FastMatch Inc., a separate company that operates an electronic currency-trading platform. FastMatch matches buy and sell orders among banks, hedge funds and other asset managers. The company estimates its share is worth roughly $70 million.

We’re still waiting for definitive news on whether or not FXCM is going after negative client accounts but so far the tea leaves point to ‘yes’. If so, we think all traders should reconsider doing business with them.

Especially after they made frequent claims like this one:

This is reportedly the letter that’s been sent to clients:

Dear Client,


Please be advised that in order to offset negative balances you currently hold in your FXCM account(s), FXCM has transferred funds from your account(s) with a positive balance. The terms of your master trading agreement entered into with FXCM, available online, provide FXCM with these rights.

If after this transfer you still maintain a negative balance on your account, you are requested to remit funds immediately. FXCM accepts deposits by, debit card, bank wire and ACH electronic check. All options can be accessed via our www.myfxcm.com portal.

As you may already be aware, last week, the Swiss National Bank (“SNB”) announced that they will no longer support a self-imposed floor on the EUR/CHF exchange rate. Learn More.

The SNB announcement, extreme price movements and the resulting lack of liquidity were exceptional and unprecedented events causing many market participants to incur trading losses. These events were unforeseen and beyond the control of FXCM, constituting force majeure events.

Record of this transaction is available by generating a Combined Account Statement and referencing the description “Offset Transfer from Account to Account for Negative Balance”.

FXCM thanks you for you cooperation and understanding.

If you have any questions, please contact one of our specialists, who are available 24 hours a day, by live chat, by calling 1-888-503-6739, 1-888-503-6739, or by e-mail at info@fxcm.com

FXCM hereby reserves all rights and remedies that it may have at law, in equity, under the terms of any contracts with you. Nothing in this notice shall be deemed to constitute a waiver or settlement of any of FXCM’s rights and remedies.

Here is a list of forex brokers forgiving negative balances and those who aren’t


January 23rd, 2015 20:36:27 GMT.

CFTC Commitments of Traders: Yen shorts lighten up, euro shorts pile in


Forex futures market speculative positioning data from the CFTC Commitments of Traders report as of the close on Tuesday January 20, 2015:

  • EUR net short 181K vs short 168K prior
  • JPY net short 78K vs 94K short prior
  • GBP net short 46K vs short 37K prior
  • AUD net short 47K vs short 45K prior
  • CAD net short 29K vs short 21K prior
  • CHF net short 10K vs short 26K prior
  • NZD net short 2k vs short 2k prior
  • Gold net long 162K vs 130K prior
  • Full report

Credit to euro shorts, who didn’t look to be lightening up on shorts (at least they weren’t two days before the ECB). And even more credit to anyone who owned one of those short contracts.

A few points:

  1. CAD longs have plenty of room to expand
  2. GBP shorts are suddenly a popular trade
  3. Gold is starting to get some speculative love
  4. I don’t think any of those 10K CHF shorts are the same ones who held a net -26K the week before and saw the market go 2,200 ticks against them in a moment, or about $27,500 per contract. Multiply that by 26,000 contracts and there’s a $750m hole in traders’ accounts.

EUR FX net short

The latest move broke the 2014 low but there’s still some room to run before the -214K low in June 2012. Note that the euro bottomed a month after that reading.


January 23rd, 2015 20:25:03 GMT.

USD/JPY ebbing and flowing with stocks and QE news


USD/JPY is at 117.78 after rising as high as 118.82 in Asia-Pacific trading.

The decline has erased most of the surge from 117.25 follow the risk rally that got underway about an hour after Draghi’s press conference began.

The pair bottomed at 117.54 in US trading but bounced along with stocks on the comments from Coeure. The latest moves coincide with the stock market. The S&P 500 is down 6 points at 2056 and has traded in a 2052 to 2063 range.

If there’s anything we’ve learned about stocks over the past 5 years it’s that a rally into the close is much more likely.

Overall, I think USD/JPY is stuck in a bit of a chop at the moment and I like waiting for more clarity.


January 23rd, 2015 19:36:56 GMT.

Saxo Bank loses up to $107m on Swiss franc trades – is chasing negative balances


The SNB decision hit Saxo Bank hard, the company revealed in a statement Friday.

“Saxo Bank Group estimates the maximum loss that the Bank can incur in relation to the sudden material increase in the price of Swiss Franc on 15 January, 2015, to be DKK 0.7 billion equal to USD 107m on a net basis,” the firm said on Friday.

The statement is a bit confusing because a separate line says “Taking the estimated maximum loss into account the Total Capital of Saxo Bank A/S and Saxo Bank Group would be DKK 1.97 billion and DKK 2.15 billion respectively.” That would be around $330 million.

Even with maximum losses, the company said it “would still more than fulfill its regulatory capital requirements.”

The bad news is that the company is going after clients with negative balances — how hard they will go after them is unclear.

Negative balances

“A number of Saxo Bank’s customers ended up with insufficient margin collateral to cover their losses on positions in the Swiss franc. Saxo Bank is liaising with these clients to settle such unsecured amounts. Some customers will not be able to the settle the balance in full and the bank will incur losses in this respect,” Saxo said.

We unequivocally support brokers who are forgiving negative balances and will take whatever steps we can to encourage all brokers to do the same. We believe it’s the only way traders and the retail foreign exchange industry can move forward.

On that note, shares of FXCM are down 30% today.

Here is a list of forex brokers forgiving negative balances and those who aren’t


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