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.
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
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.
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:
IMPORTANT NEWS REGARDING YOUR FXCM TRADING ACCOUNTS
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 firstname.lastname@example.org
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.
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:
CAD longs have plenty of room to expand
GBP shorts are suddenly a popular trade
Gold is starting to get some speculative love
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.
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.
“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.
“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.
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