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George Dorgan

George Dorgan

George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on SeekingAlpha.com and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.

Articles by George Dorgan

Swiss Trade Balance January 2017: Pharma maintains the Exports in the black figures

We do not like Purchasing Power or Real Effective Exchange Rate (REER) as measurement for currencies. For us, the trade balance decides if a currency is overvalued. Only the trade balance can express productivity increases, while REER assumes constant productivity in comparison to trade partners.
On the other side, a rising trade surplus may also be caused by a higher savings rate while the trade partners decided to spend more. Recently Europeans started to increase their savings rate, while Americans reduced it. This has led to a rising trade and current surplus for the Europeans.
To control the trade balance against this “savings effect”, economists may look at imports. When imports are rising at the same pace as

Read More »

Weekly Sight Deposits and Speculative Positions: Once again a new SNB intervention record

Headlines Week February 20, 2017
Recently inflation rose more quickly in the euro zone, but this was mostly caused by a temporary oil price effect. Therefore the ECB might be dovish for a longer period than the SNB. Consumer price inflation will decide who is more dovish. Ultimately inflation will depend on the two key parameters wages and rents.
Rents will rise first in Switzerland, while the Euro zone has downwards pressures in the Southern countries. Wage pressures are weak in both. Wages are increasing more strongly only in Germany and Eastern European countries.
FX week until February 20
The EUR/CHF fell to new lows. The average rate in the week was 1.0648. The SNB is apparently ready to let the pair slowly

Read More »

Weekly Speculative Position: Rising EUR shorts and falling CHF shorts point to weaker EUR/CHF

Swiss Franc
Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.
The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The
reverse carry trade in form of the Long CHF started and lasted – without some interruptions – until the peg introduction in September 2011.
In mid 2011, the long CHF trade became a proper carry trade – and not a reverse carry trade anymore – because investors thought that the SNB would hike rates earlier than the Fed.
CHF Speculative Positions
Last

Read More »

FX Weekly Review, February 13 – 18: Why still long the dollar?

Swiss Franc Currency Index
The Swiss Franc index was mostly unchanged against the U.S. Dollar Index in the last week.
One word about Marc Chandler’s argumentation below:

Three types of investors are long the dollar:
FX investors/speculators are long the dollar because of the difference in monetary policy (e.g. higher US rates).
Cash investors, for example rich people from China and other Emerging Markets, currently prefer the dollar as safe-haven against political and economic uncertainty.
Fixed-income investors are rather long U.S. Bonds because higher yields.
All three points speak for a stronger dollar. On the other side:
4. European and Swiss equities are not so much overvalued as U.S. stocks are. And flows

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Swiss Producer and Import Price Index in January 2017: +0.4 percent

The Producer Price Index (PPI) or officially named "Producer and Import Price Index" describes the changes in prices for producers and importers. For us it is interesting because it is used in the formula for the Real Effective Exchange Rate. When producers and importers profit on lower price changes when compared to other countries, then the Swiss Franc reduces its overvaluation. The Swiss PPI values of -6% in 2015 (see below), compared to -3% in Europe or -1% in the U.S., diminished the overvaluation. See more in Is the Swiss Franc overvalued?.
Producer and Import Price Index in January 2017
From the data release of Swiss Statistics:
Neuchâtel, 14.02.2017 (FSO) – The Producer and Import Price Index rose in January

Read More »

Weekly Sight Deposits and Speculative Positions: Another Post-Trump SNB Intervention Record

Headlines Week February 13, 2017
Recently inflation rose more quickly in the euro zone, but this was mostly caused by a temporary oil price effect. Therefore the ECB might be dovish for a longer period than the SNB. Consumer price inflation will decide who is more dovish. Ultimately inflation will depend on the two key parameters wages and rents.
Rents will rise first in Switzerland, while the Euro zone has downwards pressures in the Southern countries. Wage pressures are weak in both. Wages are increasing more strongly only in Germany and Eastern European countries.
FX week until February 13
The EUR/CHF continues between 1.0630 and 1.0680
A big Swiss bank bets on EUR/CHF 1.10 as soon as the ECB ends their bond

Read More »

Weekly Speculative Position: Speculators are long all currencies of the dollar bloc

Swiss Franc
Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.
The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The
reverse carry trade in form of the Long CHF started and lasted – without some interruptions – until the peg introduction in September 2011.
In mid 2011, the long CHF trade became a proper carry trade – and not a reverse carry trade anymore – because investors thought that the SNB would hike rates earlier than the Fed.
CHF Speculative Positions
Last

Read More »

FX Weekly Review, February 06 – 11: Further Dollar and CHF Strength versus Euro weakness ahead?

Swiss Franc Currency Index

The major information about the Swiss economy since the beginning of the year were:
New record in exports and in the trade surplus, albeit mostly driven by a few sectors: pharmaceuticals and chemicals.
Considerable improvement of the consumer sentiment
Improvement of the UBS consumption indicator.
While in 2015, the trade surplus still expanded, we see clear tendencies that in 2017 the Swiss economy will be driven more strongly by internal demand. It could even be a light form of a “boom”, namely when domestic demand rises more strongly than GDP.
We are expecting a further strengthening of both dollar and Swiss Franc against the euro over the next 3 months. Reason is the rising Swiss

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FX Daily, February 08: EUR/CHF down to 1.630, Swiss Boom Starting?

Will EUR/CHF fall to 1.00
The reader might have seen the latest Swiss Consumer Sentiment and the UBS consumption indicator. They suggest that the Swiss boom phase should finally come.
I anticipated the boom already in my slides for the CFA Society. The Swiss boom was postponed when the SNB decided to remove the euro peg in early 2015.
What is the definition of a “boom”? It is economic activity mostly driven by internal demand. This boom phase has already started in the United States, where internal demand (+2.4%) rises more quickly than GDP (+1.9%).
What does it mean for EUR/CHF ? Further downside towards 1.00, simply because the boom in the eurozone will start later. High unemployment and weak real estate prices

Read More »

Weekly Sight Deposits and Speculative Positions: SNB Intervenes for 2.4 bn CHF, while Speculators increase CHF Shorts

Headlines Week February 06, 2017
Recently inflation rose more quickly in the euro zone, but this was mostly caused by a temporary oil price effect. Therefore the ECB might be dovish for a longer period than the SNB. Consumer price inflation will decide who is more dovish. Ultimately inflation will depend on the two key parameters wages and rents.
Rents will rise first in Switzerland, while the Euro zone has downwards pressures in the Southern countries. Wage pressures are weak in both. Wages are increasing more strongly only in Germany and Eastern European countries.
FX week February 06
In the week after the disappoint US GDP release, the EUR/CHF fell to 1.0650.
A big Swiss bank bets on EUR/CHF 1.10 as soon as the

Read More »

FX Weekly Review, January 30 – February 04: Reversal of Trump Reflation Trade Continues

Swiss Franc Currency Index
The Swiss Franc index remained around the 2% gain that for the last month, the recovery from the Trump reflation trade. In this trade, investors preferred U.S. against European stocks. This tendency, however, is reversing now – and with it the franc recovered.

Trade-weighted index Swiss Franc, February 04(see more posts on Swiss Franc Index, ) Source: market.ft.com – Click to enlarge
 
Swiss Franc Currency Index (3 years)
The Swiss Franc index is the trade-weighted currency performance (see the currency basket)On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 33% of the SNB portfolio and 25% of Swiss exports

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Weekly Sight Deposits and Speculative Positions: Strong Swiss Trade Balance: SNB allows EUR/CHF to 1.0680

Headlines Week January 30, 2017
Recently inflation rose more quickly in the euro zone, but this was mostly caused by a temporary oil price effect. Therefore the ECB might be dovish for a longer period than the SNB. Consumer price inflation will decide who is more dovish. Ultimately inflation will depend on the two key parameters wages and rents.
Rents will rise first in Switzerland, while the Euro zone has downwards pressures in the Southern countries. Wage pressures are weak in both. Wages are increasing more strongly only in Germany and Eastern European countries.
FX week ending Jan 30
With the strong Swiss trade balance, the SNB let the euro fall to the lower area of the “in-official EUR/CHF minimum band” at

Read More »

Weekly Speculative Position: Net Short Euro and Yen Are Falling. Short CHF Stable

Swiss Franc
Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.
The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The
reverse carry trade in form of the Long CHF started and lasted – without some interruptions – until the peg introduction in September 2011.
In mid 2011, the long CHF trade became a proper carry trade – and not a reverse carry trade anymore – because investors thought that the SNB would hike rates earlier than the Fed.
CHF Speculative Positions
This

Read More »

FX Weekly Review, January 23 – 28: Dollar Downwards and CHF Upwards Correction, for how long?

Swiss Franc Currency Index
The Swiss Franc index has a solid performance of 2.5% in the last month, while the dollar index is down nearly 3%.

Trade-weighted index Swiss Franc, January 28(see more posts on Swiss Franc Index, ) Source: markets.ft.com – Click to enlarge
 
Swiss Franc Currency Index (3 years)
The Swiss Franc index is the trade-weighted currency performance (see the currency basket)On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 33% of the SNB portfolio and 25% of Swiss exports (incl. countries like China or Arab countries that use the dollar for exchanges).

Contrary to popular believe, the CHF index gained only 1.73%

Read More »

2016: Swiss Exports and Swiss Trade Balance at New Record-Highs: Swiss Franc Shock Digested

We do not like Purchasing Power or Real Effective Exchange Rate (REER) as measurement for currencies. For us, the trade balance decides if a currency is overvalued. Only the trade balance can express productivity increases, while REER assumes constant productivity in comparison to trade partners.On the other side, a rising trade surplus may also be caused by a higher savings rate while the trade partners decided to spend more. Recently Europeans started to increase their savings rate, while Americans reduced it. This has led to a rising trade and current surplus for the Europeans.To control the trade balance against this “savings effect”, economists may look at imports. When imports are rising at the same pace as

Read More »

Weekly Sight Deposits and Speculative Positions: Weaker dollar let SNB accumulates losses

Headlines Week January 23, 2017
Who has read Milton Friedman knows that the Trump reflation trade is now showing its positive side. US wages are rising by 2.5%, while inflation is still relatively low. According to Friedman, inflation will increase only later.
This implies that speculators are long the dollar and short the Swiss franc and the euro during the weak inflation period.
The last ECB meeting showed that the ECB might be dovish for a longer period than the SNB. Consumer price inflation will decide who is more dovish. Ultimately inflation will depend on the two key parameters wages and rents.
Rents will rise first in Switzerland, while the Euro zone has downwards pressures in the Southern countries. Wage

Read More »

Weekly Speculative Position: CHF getting stronger, net shorts stable

Swiss Franc
Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.
The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The
reverse carry trade in form of the Long CHF started and lasted – without some interruptions – until the peg introduction in September 2011.
In mid 2011, the long CHF trade became a proper carry trade – and not a reverse carry trade anymore – because investors thought that the SNB would hike rates earlier than the Fed.
CHF Speculative Positions
This

Read More »

Weekly SNB Intervention Update: Sight Deposits and Speculative Position

Headlines Week January 23, 2017
Who has read Milton Friedman knows that the Trump reflation trade is now showing its positive side. US wages are rising by 2.5%, while inflation is still relatively low. According to Friedman, inflation will increase only later.
This implies that speculators are long the dollar and short the Swiss franc and the euro during the weak inflation period.
The last ECB meeting showed that the ECB might be dovish for a longer period than the SNB. Consumer price inflation will decide who is more dovish. Ultimately inflation will depend on the two key parameters wages and rents.
Rents will rise first in Switzerland, while the Euro zone has downwards pressures in the Southern countries. Wage

Read More »

FX Weekly Review, January 16 – 21: Dollar Still Appears to Carving out a Bottom

Swiss Franc Currency Index
During the last month the Swiss Franc index recovered some of the losses since the election of Donald Trump.
Its performance is +2%, while the dollar index is 2% down.

Trade-weighted index Swiss Franc, January 21(see more posts on Swiss Franc Index, ) Source: markets.ft.com – Click to enlarge
 
Swiss Franc Currency Index (3 years)
The Swiss Franc index is the trade-weighted currency performance (see the currency basket)On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 33% of the SNB portfolio and 25% of Swiss exports (incl. countries like China or Arab countries that use the dollar for exchanges).

Contrary

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Swiss Producer and Import Price Index, December 2016: +0.2 percent MoM, -1.8 percent YoY

The Producer Price Index (PPI) or officially named "Producer and Import Price Index" describes the changes in prices for producers and importers. For us it is interesting because it is used in the formula for the Real Effective Exchange Rate. When producers and importers profit on lower price changes when compared to other countries, then the Swiss Franc reduces its overvaluation. The Swiss PPI values of -6% in 2015 (see below), compared to -3% in Europe or -1% in the U.S., diminished the overvaluation. See more in Is the Swiss Franc overvalued?.
Producer and Import Price Index in December 2016
From the data release of Swiss Statistics:
Neuchâtel, 19.01.2017 (FSO) – The Producer and Import Price Index rose in

Read More »

Tourism accommodation statistics in November 2016: Slight increase in overnight stays in November

Neuchâtel, 16.01.2017 (FSO) – The Swiss hotel industry registered 1.9 million overnight stays in November 2016, which corresponds to a slight growth of 0.5% (+9300 overnight stays) compared with the same period a year earlier. Domestic visitors generated 878,000 overnight stays, representing an increase of 0.9% (+7900). Foreign visitors generated 999,000 overnight stays, i.e. a very slight increase of 0.1% (+1400).

Swiss Tourism in the Autmn Season
The cumulative number of overnight stays from January to November 2016 was 33.0 million. This represents a decrease of 0.5% (-153,000 overnight stays) compared with the same period a year earlier.

Hotels and Health Resorts, Autmn 2015-2016(see more posts on Switzerland

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Weekly Sight Deposits and Speculative Positions: Stronger SNB interventions at more expensive EUR

Headlines Week January 13, 2017
Who has read Milton Friedman knows that the Trump reflation trade is now showing its positive side. US wages are rising by 2.5%, while inflation is still relatively low. According to Friedman, inflation will increase only later.
This implies that speculators are long the dollar and short the Swiss franc and the euro during the weak inflation period.
The last ECB meeting showed that the ECB might be dovish for a longer period than the SNB. Consumer price inflation will decide who is more dovish. Ultimately inflation will depend on the two key parameters wages and rents.
Rents will rise first in Switzerland, while the Euro zone has downwards pressures in the Southern countries. Wage

Read More »

Weekly Speculative Positions: CHF and GBP net shorts are slowly rising again

Swiss Franc
Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.
The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The
reverse carry trade in form of the Long CHF started and lasted – without some interruptions – until the peg introduction in September 2011.
In mid 2011, the long CHF trade became a proper carry trade – and not a reverse carry trade anymore – because investors thought that the SNB would hike rates earlier than the Fed.
CHF Speculative Positions
This

Read More »

Weekly Speculative Position: CHF Net Shorts rising, but JPY net shorts falling

Swiss Franc
Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.
The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The
reverse carry trade in form of the Long CHF started and lasted – without some interruptions – until the peg introduction in September 2011.
In mid 2011, the long CHF trade became a proper carry trade – and not a reverse carry trade anymore – because investors thought that the SNB would hike rates earlier than the Fed.
CHF Speculative Positions
This

Read More »

Switzerland Unemployment December 2016, Unemployment by Nationality

Unemployment Rate (not seasonally adjusted)
According to the SECO surveys, 159,372 unemployed were registered at the Regional Employment Centers (RAV) at the end of December 2016, 10,144 more than in the previous month. The unemployment rate thus rose from 3.3% in November 2016 to 3.5% in the reporting month.

Switzerland Unemployment Rate Not Seasonally Adjusted December 2016(see more posts on Switzerland Unemployment Rate, ) Source: Investing.com – Click to enlarge

Seasonally adjusted Unemployment Rate 
The seasonally adjusted unemployment rate remained the same at 3.5%.

Switzerland Unemployment Rate Seasonally Adjusted December 2016(see more posts on Switzerland Unemployment Rate, ) Source:

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SNB announces 24 bn CHF profit for 2016 thanks to rising stock markets.

The Swiss National Bank has announced 24 bn profits for 2016. Profits came from the dollar, yen and Canadian dollar, while the pound retreated by 15%. The EUR/CHF is only slightly weaker, mostly because the SNB actively supported the euro.

SNB profits on USD, CAD and JPY, loses on GBP (see more posts on British Pound, Canadian Dollar, Japanese yen, SNB profit, US dollar, )FX rates for USD, JPY, EUR, GBP in 2016 with base currency CHF Source: fx.sauder.ubc.ca – Click to enlarge
The SNB mostly profited on rising U.S. stock markets, in particular the S&P500.

SNB Profit Increases Thanks to Well Performing Stock Markets(see more posts on FTSE 100, German DAX, Nikkei 225, S&P 500 Index, ) Source: markets.ft.com –

Read More »

Weekly Sight Deposits and Speculative Positions: SNB Intervenes, Speculators Short CHF again

Headlines Week January 09, 2017
Who has read Milton Friedman knows that the Trump reflation trade is now showing its positive side. US wages are rising by 2.5%, while inflation is still relatively low. According to Friedman, inflation will increase only later.
This implies that speculators are long the dollar and short the Swiss franc and the euro during the weak inflation period.
The last ECB meeting showed that the ECB might be dovish for a longer period than the SNB. Consumer price inflation will decide who is more dovish. Ultimately inflation will depend on the two key parameters wages and rents.
Rents will rise first in Switzerland, while the Euro zone has downwards pressures in the Southern countries. Wage

Read More »

Weekly Speculative Positions: CHF and GBP net shorts are slowly rising again

Swiss Franc
Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.
The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The
reverse carry trade in form of the Long CHF started and lasted – without some interruptions – until the peg introduction in September 2011.
In mid 2011, the long CHF trade became a proper carry trade – and not a reverse carry trade anymore – because investors thought that the SNB would hike rates earlier than the Fed.
CHF Speculative Positions
This

Read More »

Consumer Prices in Europe Compared: The Energy Price Turn-Around

Energy prices in Switzerland turned around from a minus 2.4% in November to a +6.8% in December. Oil prices had seen its trough exactly one year ago. Especially in Germany and Spain, this translated into inflation rates, that are close to the ECB target rate of 2%.
Switzerland still saw downwards pressures caused by cheaper imports. Despite rising energy costs, total prices of imported goods are down 0.6%. Consumers obtain prices advantages on imported products often with a big delay.
Food inflation 
Highest in Germany with 2.5%, lowest in the United States with -0.4% (November data).
Especially the poor struggle with higher prices for food.
Shelter inflation
Highest in the U.S. with 3.6% and lowest in Italy with

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Weekly Sight Deposits and Speculative Positions:

Headlines Week January 02, 2017
Who has read Milton Friedman knows that the Trump reflation trade is now showing its positive side. US wages are rising by 2.5%, while inflation is still relatively low. According to Friedman, inflation will increase only later.
This implies that speculators are long the dollar and short the Swiss franc and the euro.
The last ECB meeting showed that the ECB might be dovish for a longer period than the SNB. Consumer price inflation will decide who is more dovish. Ultimately inflation will depend on the two key parameters wages and rents.
Rents will rise first in Switzerland, while the Euro zone has downwards pressures in the Southern countries. Wage pressures are weak in both. Wages

Read More »

Weekly Speculative Positions: Speculators go short CHF again after a brief period of Long CHF

Swiss Franc
Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.
The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The
reverse carry trade in form of the Long CHF started and lasted – without some interruptions – until the peg introduction in September 2011.
In mid 2011, the long CHF trade became a proper carry trade – and not a reverse carry trade anymore – because investors thought that the SNB would hike rates earlier than the Fed.

Speculative Positions
Choose

Read More »

Weekly Speculative Positions: Speculators go short CHF again after a brief period of Long CHF

Swiss Franc
Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.
The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The
reverse carry trade in form of the Long CHF started and lasted – without some interruptions – until the peg introduction in September 2011.
In mid 2011, the long CHF trade became a proper carry trade – and not a reverse carry trade anymore – because investors thought that the SNB would hike rates earlier than the Fed.
CHF Speculative Positions
This

Read More »

RSS Readers: Please update the SNBCHF feed URL

SNBCHF is using now a new RSS feed URL.

https://snbchf.com/feed/     for RSS
and https://snbchf.com/feed/atom   if somebody uses atom.

The old feed remains working for now, but we suggest that RSS readers switch to the new one.

Tags: Feed,RSS

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Weekly Sight Deposits and Speculative Positions: SNB intervenes, while Speculators go Long CHF

Headlines Week Ending December 23 , 2016
Who has read Milton Friedman knows that the Trump reflation trade is now showing its positive side. US wages are rising by 2.5%, while inflation is still relatively low. According to Friedman, inflation will increase only later.
This implies that speculators are long the dollar and short the Swiss franc and the euro.
The last ECB meeting showed that the ECB might be dovish for a longer period than the SNB. Consumer price inflation will decide who is more dovish. Ultimately inflation will depend on the two key parameters wages and rents.
Rents will rise first in Switzerland, while the Euro zone has downwards pressures in the Southern countries. Wage pressures are weak in both.

Read More »

Weekly Speculative Positions: After Fed Rate Hike, Speculators Close their Short CHF and Open Long CHF

Swiss Franc
Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.
The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The
reverse carry trade in form of the Long CHF started and lasted – without some interruptions – until the peg introduction in September 2011.
In mid 2011, the long CHF trade became a proper carry trade – and not a reverse carry trade anymore – because investors thought that the SNB would hike rates earlier than the Fed.
Last Week’s data:
There was a sudden

Read More »

Swiss National Bank further strengthens provisions for currency reserves

The Swiss National Bank uses a strange formula on the basis of economic growth for the provisions for FX losses. It would be much easier to connect this number to the size of the balance sheet, for example 10% of the balance sheet. The risks of losses are particularly high, because FX rates are very volatile and nearly all SNB investments are in foreign currency.
From the press release:

Allocation of CHF 4.6 billion for the 2016 financial year
At its meeting of 16 December 2016, the Bank Council of the Swiss National Bank (SNB) approved the allocation to the provisions for currency reserves for the 2016 financial year.
The annual allocation will continue to be determined on the basis of double the average nominal

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Weekly Speculative Positions: Short CHF Close to Records of 2015

Speculators appeared mostly interested in reducing exposure in the run-up to the US jobs data and the Italian referendum. They liquidated gross longs in the currency futures market and covered shorts. Of the eight currencies we track there were two exceptions, the Japanese yen and the Swiss franc.

Swiss Franc
Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.
The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The
reverse carry trade in form of the Long CHF started and

Read More »

FX Weekly Review, December 12 – December 16: Fed Lifts Dollar, but Consolidation may be on Tap

Swiss Franc Currency Index
The Swiss Franc index reduced its losses to 2 percent in the last month, while the dollar index is still 2.5 percent up.

Trade-weighted index Swiss Franc, December 16(see more posts on Swiss Franc Index, ) Source: FT.com – Click to enlarge
The chart shows the massive advance of the dollar index in the last three years, while the Swiss Franc index lagged.
Swiss Franc Currency Index (3 years)
The Swiss Franc index is the trade-weighted currency performance (see the currency basket)On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 33% of the SNB portfolio and 25% of Swiss exports (incl. countries like China or Arab

Read More »

Swiss Producer and Import Price Index, November 2016: +0.1 percent MoM, -0.6 percent YoY

The Producer Price Index (PPI) or officially named "Producer and Import Price Index" describes the changes in prices for producers and importers. For us it is interesting because it is used in the formula for the Real Effective Exchange Rate. When producers and importers profit on lower price changes when compared to other countries, then the Swiss Franc reduces its overvaluation. The Swiss PPI values of -6% in 2015 (see below), compared to -3% in Europe or -1% in the U.S., diminished the overvaluation. See more in Is the Swiss Franc overvalued?.
Producer and Import Price Index in November 2016
From the data release of Swiss Statistics:
Neuchâtel, 14.12.2016 (FSO) – The Producer and Import Price Index rose in

Read More »

Swiss Producer and Import Price Index, November 2016: +0.1 percent MoM, -0.6 percent YoY

The Producer Price Index (PPI) or officially named "Producer and Import Price Index" describes the changes in prices for producers and importers. For us it is interesting because it is used in the formula for the Real Effective Exchange Rate. When producers and importers profit on lower price changes when compared to other countries, then the Swiss Franc reduces its overvaluation. The Swiss PPI values of -6% in 2015 (see below), compared to -3% in Europe or -1% in the U.S., diminished the overvaluation. See more in Is the Swiss Franc overvalued?.
Producer and Import Price Index in November 2016
From the data release of Swiss Statistics:
Neuchâtel, 14.12.2016 (FSO) – The Producer and Import Price Index rose in

Read More »

Weekly Sight Deposits: Week December 09, 2016

Headlines Week December 09, 2016
Who has read Milton Friedman knows that the Trump reflation trade is now showing its positive side. US wages are rising by 2.5%, while inflation is still relatively low. According to Friedman, inflation will increase only later.
This implies that speculators are long the dollar and short the Swiss franc and the euro.
Last week’s ECB meeting showed that the ECB might be dovish for a longer period than the SNB. Consumer price inflation will decide who is more dovish. Ultimately inflation will depend on the two key parameters wages and rents.
Rents will rise first in Switzerland, while the Euro zone has downwards pressures in the Southern countries. Wage pressures are weak in both.

Read More »

Weekly Sight Deposits: No SNB Interventions, Short CHF nearing records

Headlines Week December 09, 2016
Who has read Milton Friedman knows that the Trump reflation trade is now showing its positive side. US wages are rising by 2.5%, while inflation is still relatively low. According to Friedman, inflation will increase only later.
This implies that speculators are long the dollar and short the Swiss franc and the euro.
Last week’s ECB meeting showed that the ECB might be dovish for a longer period than the SNB. Consumer price inflation will decide who is more dovish. Ultimately inflation will depend on the two key parameters wages and rents.
Rents will rise first in Switzerland, while the Euro zone has downwards pressures in the Southern countries. Wage pressures are weak in both.

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Weekly Speculative Positions: Short CHF Close to Records of 2015

Speculators appeared mostly interested in reducing exposure in the run-up to the US jobs data and the Italian referendum. They liquidated gross longs in the currency futures market and covered shorts. Of the eight currencies we track there were two exceptions, the Japanese yen and the Swiss franc.

Swiss Franc
Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.
The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The
reverse carry trade in form of the Long CHF started and

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Weekly Speculative Positions: Short CHF Close to Records of 2015

Speculators appeared mostly interested in reducing exposure in the run-up to the US jobs data and the Italian referendum. They liquidated gross longs in the currency futures market and covered shorts. Of the eight currencies we track there were two exceptions, the Japanese yen and the Swiss franc.

Swiss Franc
Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.
The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The
reverse carry trade in form of the Long CHF started and

Read More »

Weekly SNB Intervention Update: Sight Deposits and Speculative Position

Headlines Week December 09, 2016
Who has read Milton Friedman knows that the Trump reflation trade is now showing  its positive side. US wages are rising by 2.5%, while inflation is still relatively low. According to Friedman, inflation will increase only later.
This implies that speculators are long the dollar and short the Swiss franc and the euro.
Last week’s ECB meeting showed that the ECB might be dovish for a longer period than the SNB. Consumer price inflation will decide who is more dovish. Ultimately inflation will depend on the two key parameters wages and rents.
Rents will rise first in Switzerland, while the Euro zone has downwards pressures in the Southern countries. Wage pressures are weak in both.

Read More »

FX Weekly Review, December 05 – December 09: Dollar Bulls Running Out of Time to See Parity vs Euro in 2016

Swiss Franc Currency Index
The Swiss Franc index remained in a losing position compared to the dollar index. However since November 25, it has remained stable.
Given that the ECB extended the QE period, the EUR/CHF has fallen to 1.0730 again.

Trade-weighted index Swiss Franc, December 09(see more posts on Swiss Franc Index, ) Source: FT.com – Click to enlarge
Swiss Franc Currency Index (3 years)
The Swiss Franc index is the trade-weighted currency performance (see the currency basket)

On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 33% of the SNB portfolio and 25% of Swiss exports (incl. countries like China or Arab countries that use

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FX Weekly Review, December 05 – December 09: Dollar Bulls Running Out of Time to See Parity vs Euro in 2016

Swiss Franc Currency Index
The Swiss Franc index remained in a losing position compared to the dollar index. However since November 25, it has remained stable.
Given that the ECB extended the QE period, the EUR/CHF has fallen to 1.0730 again.

Trade-weighted index Swiss Franc, December 09(see more posts on Swiss Franc Index, ) Source: FT.com – Click to enlarge
Swiss Franc Currency Index (3 years)
The Swiss Franc index is the trade-weighted currency performance (see the currency basket)

On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 33% of the SNB portfolio and 25% of Swiss exports (incl. countries like China or Arab countries that use

Read More »

200 Russian Propaganda Sites, or simply alternative media?

The following is the list of “Russian Propaganda sites”, as published by PropOrNot. Several articles by the Washington Post refer to this list.
Many sites on that list are based on libertarian ideas and Austrian economics. Those are in favor of a free market economy, they reject central banks, the big state and the establishment.
Examples are
davidstockmanscontracorner.com
beforeitsnews.com
lewrockwell.com
zerohedge.com
oftwominds.com
sgtreport.com
The list also contains the site of the former congress Ron Paul ronpaulinstitute.org. Paul is the “spiritual leader” of the American libertarians.
Close to Ron Paul’s ideas about less U.S. military adventures abroad are the anti-war sites

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200 Russian Propaganda Sites, or simply alternative media?

The following is the list of “Russian Propaganda sites”, as published by PropOrNot. Several articles by the Washington Post refer to this list.
Many sites on that list are based on libertarian ideas and Austrian economics. Those are in favor of a free market economy, they reject central banks, the big state and the establishment.
Examples are
davidstockmanscontracorner.com
beforeitsnews.com
lewrockwell.com
zerohedge.com
oftwominds.com
sgtreport.com
The list also contains the site of the former congress Ron Paul ronpaulinstitute.org. Paul is the “spiritual leader” of the American libertarians.
Close to Ron Paul’s ideas about less U.S. military adventures abroad are the anti-war sites

Read More »

November 2016: Swiss consumer price inflation remain lowest compared to Eurozone and U.S.

Swiss consumer price inflation remain lowest compared to Eurozone and U.S.
Swiss consumer price inflation remain the lowest in comparison with different countries in the euro zone and the United States. Consumer prices in the U.S. are driven by rising health care costs and asset price inflation in shelter.
In Europe, we see the opposite phenomenon: Rents in Italy or Spain are steady or falling. In Germany and Switzerland rent control prevents that asset price inflation moves into consumer prices.
In Switzerland, more and more supply is helping to contain housing costs.

Inflation Rate YoY
and Main Drivers
Switzerland
Germany
Euro Area
Spain
Italy
United States
Weight (Switzerland)
Weight (US)
Total
-0.3%
+0.8%

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Swiss Tourism: More Swiss Guests, Less Asian Guests

In the summer months, the Swiss hotels registered more guests from Switzerland. from the United States and from Europe. But there was a sharp decline of guest from Asia.
100’000 more overnight stays from Switzerland could not recover the decrease of 200’000. One important reason for decline is the weakening Chinese currency, that reduced their purchasing power, in dollar but also in CHF.

CNY is Weakening and Reducing Chinese Purchasing Power(see more posts on USD-CNY, ) – Click to enlarge
from the official press release
Swiss Tourism in the Summer Season
Neuchâtel, 05.12.2016 (FSO) – The hotel sector registered 20 million overnight stays in Switzerland during the summer season 2016 (May to October).
This

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Italian Euro Exit: Why it Might Come in some Years and Why it Will Help the Euro Zone and Italy

Update December 2016:
Italians rejected the referendum that seeks to increase power of the prime minister and reduce power of the two chambers parliament. Prime minister Renzi has promised to resign.
This opens the door for new elections, in which the anti-euro parties Movimento 5 stelle (5 star movement) and Lega Nord (Northern League) may strengthen.

—————————————————————————————
Update December 2013:
Bear in mind that Italy has three options to become competitive again:
either exit the euro zone and devalue the currency; more in this post.
remain in the euro zone and devalue salaries.
go for Japan-like decades-long slow growth with stagnating wages, but also with falling inflation and (positive news!) falling

Read More »

FX Weekly Review, November 28 – December 02: CHF Index still at its 4% loss since U.S. Elections

Swiss Franc Currency Index
The Swiss Franc index continued around its 4% loss since the U.S. elections, while the US Dollar index had a 4% increase.

Trade-weighted index Swiss Franc, December 02(see more posts on Swiss Franc Index, ).
Swiss Franc Currency Index (3 years)
The Swiss Franc index is the trade-weighted currency performance (see the currency basket)

On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 33% of the SNB portfolio and 25% of Swiss exports (incl. countries like China or Arab countries that use the dollar for exchanges).

Contrary to popular believe, the CHF index gained only 1.73% in 2015. It lost 9.52% in 2014.,

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Net National Savings Rate, the Best Alternative Indicator to GDP Growth

For us the Net National Savings Rate is the best alternative indicator to GDP growth. The Net National Savings Rate (NNSR) is rather positively correlated with the change in wealth, with the establishment of future productive capacity, the price of government bonds and currency valuations. The relationship of GDP growth to those four criteria, however, is often a negative correlation.

We critized GDP growth that has become mostly an indicator of consumption and activity. We emphasized that strong GDP growth, in particular consumption-driven (hyper-) activity may lead to a depreciating currency, falling government bond prices and wealth in real terms.
In this post we will provide an alternative indicator that is able

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Weekly Speculative Positions: Short CHF Are Increasing

In the CFTC reporting week ending November 28, speculators added 12.1k contracts to their gross short position, lifting it to 72.4k contracts. Speculators added a little less than one thousand contracts to the gross longs, which then stood at 72.1k contracts.

Since peaking in early October near 102k contracts, 30k gross long contracts have been liquidated.  Over the same period, almost 40k contracts have been added to the gross short exposure.  The result is that the net position is short about three hundred futures contracts.  That leaves the Australian dollar as the only currency futures we track in which speculators are still net long.  And even there they are back.

Swiss Franc
Speculators were net short

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Swiss GDP +0.0 percent QoQ, +1.3 percent YoY

From the official release

Gross domestic product in the 3rd quarter of 2016
Bern, 02.12.2016 – Switzerland’s real gross domestic product (GDP) has remained almost unchanged in the 3rd quarter of 2016 (+0.0%). Consumption has contributed very little to growth. Investment in construction and equipment has supported GDP growth, while the trade balance in goods and services had a negative effect. On the production side, the growth of value added has been below its historical mean in most sectors, with trade as well as health and social work activities having a negative impact. Manufacturing and the accommodation and food service industry have made positive contributions. Real GDP has grown by 1.3% in comparison to

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Weekly Sight Deposits: Investors hedge with Swiss Franc again for the coming inflation cycle.

Headlines Week November, 25 2016
We explained the Trump reflation trade, where the Swiss Franc acts as the usual inflation hedge against the obviously inflationary policies of Trumpeconomics.
Trump is about tax cuts – i.e. a fiscal deficit up to 10%, and about protectionism. Trump would restrict global trade and push up U.S. wages.
According to Lars Christensen Trumpeconomics is also about monetary stimulus: Trump would push for a more jobs and a dovish Fed, same as his fellow Republican Nixon did. He could even replace the “hawk” Yellen.
Long-term oriented investors have realized that. They bought Swiss Franc cash as inflation hedge or Swiss Franc pharma stocks that profit on less pharma regulation under Trump .

Read More »

FX Weekly Review, November 21 – November 25: Dollar Strength Losing Steam

Swiss Franc Currency Index
At least against the Swiss Franc index, the dollar index could further advance last week. We had observed SNB interventions in the previous week that kept the euro mostly above 1.07. Investors were hedging against the Trump reflation trade and potential inflation that comes with it.

Trade-weighted index Swiss Franc, November 25(see more posts on Swiss Franc Index, ). Source: FT.com – Click to enlarge
Swiss Franc Currency Index (3 years)
The Swiss Franc index is the trade-weighted currency performance (see the currency basket)

On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 33% of the SNB portfolio and 25% of

Read More »

Swiss Health Insurers Increase Premiums Despite Falling Costs

It is a very interesting discrepancy:

Health Care Costs Have Fallen By 0.6% 
On one side, Swiss Statistics regularly publishes the consumer price index. In this statistic health care prices have fallen by 0.6% against the previous year: one major reason is the stronger franc that allowed for buying health equipment at lower price abroad. We should remind that Swiss Statistics uses these effective prices for inflation calculation and NOT the premiums paid to the insurers.

Falling Health Care Prices in Switzerland(see more posts on health care, ).

Insurers continue to raise premiums
from Swiss Statistics
The health insurance premium index (KVPI) has registered an increase of 3.0% for premiums in 2016 compared with

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Swiss Trade Surplus Shrinks in October

We do not like Purchasing Power or Real Effective Exchange Rate (REER) as measurement for currencies. For us, the trade balance decides if a currency is overvalued.  Only the trade balance can express productivity increases, while REER assumes constant productivity in comparison to trade partners.
On the other side, a rising trade surplus may also be caused by a higher savings rate while the trade partners decided to spend more. Recently Europeans started to increase their savings rate, while Americans reduced it. This has led to a rising trade and current surplus for the Europeans.
To control the trade balance against this “savings effect”, economists may look at imports. When imports are rising at the same pace as

Read More »

Weekly Sight Deposits: Investors hedge against Trump’s inflationary policy with Swiss Franc.

Headlines Week November 18, 2016
We explained the Trump reflation trade, where the Swiss Franc acts as the usual inflation hedge against the obviously inflationary policies of Trumpeconomics.
Trump is about tax cuts – i.e. a fiscal deficit up to 10%, and about protectionism. Trump would restrict global trade and push up wages.
According to Lars Christensen Trumpeconomics is also about monetary stimulus: Trump would push for a more jobs and a dovish Fed, same as his fellow Republican Nixon did. He could even replace the “hawk” Yellen.
Long-term oriented investors have realized that. They bought Swiss Franc cash or Swiss Franc pharma stocks that profit on less regulation.
They got the francs far cheaper than during

Read More »

FX Weekly Review, November 14 – November 18: Best Dollar Weeks since Reagan

Swiss Franc Currency Index
The weeks after Trump’s election continue to see a weakening of the Swiss Franc, while the dollar index is on a steady rise.
Still both the euro and the yen have seen worse performance than the Swiss Franc. The euro is currently under 1.07 CHF.

Trade-weighted index Swiss Franc, November 18(see more posts on Swiss Franc Index, ) Source: FT.com – Click to enlarge
Swiss Franc Currency Index (3 years)
The Swiss Franc index is the trade-weighted currency performance (see the currency basket)

On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 33% of the SNB portfolio and 25% of Swiss exports (incl. countries like

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Swiss Unemployment Rate (ILO-based) behind Iceland, Germany and Czech Republic on position 4: All Four Countries Are Currency Manipulators

With 4.8%, the Swiss unemployment rate based on the ILO concept is higher than the rates in Iceland (2.6%), Czech Republic (4.0%) and Germany (4.1%), but lower than the ones of the remaining 25 countries in the data provided by Swiss Statistics.
As for youth unemployment, the Swiss are on position three with a rate of 11%, this is half the rate of the Eurozone, or a fourth of the rate in Spain or Greece.
All Four Countries Are Currency Manipulators
Interestingly three of the countries with low unemployment support their already strong economy with FX interventions. These are Switzerland, the Czech Republic and Iceland, while Germany does these FX interventions implicitly through the mechanism called Target2.
Capital

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Swiss Producer and Import Price Index, October 2016: +0.1 percent MoM, -0.2 percent YoY

The Producer Price Index (PPI) or officially named "Producer and Import Price Index" describes the changes in prices for producers and importers. For us it is interesting because it is used in the formula for the Real Effective Exchange Rate. When producers and importers profit on lower price changes when compared to other countries, then the Swiss Franc reduces its overvaluation. The Swiss PPI values of -6% in 2015 (see below), compared to -3% in Europe or -1% in the U.S., diminished the overvaluation. See more in Is the Swiss Franc overvalued?.
Producer and Import Price Index in October 2016
From the data release of Swiss Statistics:

0.1% rise in Producer and Import Price Index
Neuchâtel, 14.11.2016 (FSO) – The

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FX Weekly Review, November 07 – November 11: The Trump Reflation Trade

Swiss Franc Currency Index and the Trump Reflation Trade
The Swiss Franc Index rose sharply, shortly after the U.S. elections. But then the Trump reflation trade came. Trump may fulfills the wet dreams of many economists. With tax cuts he might extend the U.S. fiscal deficit up to 10% per year. This resulted in:
Gains on U.S. stocks and other dollar-denominated assets. In particular by yield-seeking Japanese pension funds bought U.S. bonds. This resulted in a stronger dollar.
To a lower extend, gains on inflation hedges, in particular gold and Swiss Franc.
Gains on Swiss pharma stocks, that profit on less regulation in the U.S. pharma sector.
A stronger pound, because better stock markets help U.K. banks, while

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October 2016: Swiss inflation remain lowest compared to Eurozone and U.S.

Swiss consumer price inflation remain lowest compared to Eurozone and U.S.
Swiss consumer price inflation remain the lowest in comparison with different countries in the euro zone and the United States.
Consumer prices in the U.S. are driven by rising health care costs and asset price inflation in shelter.
In Europe, we see the opposite phenomenon: Rents in Spain or Italy are falling. In Germany and Switzerland rent control prevents that asset price inflation moves into consumer prices.
In Switzerland, more and more supply is helping to contain housing costs.

Inflation Rate YoY and Main Drivers
Switzerland
Germany
Euro Area
Spain
Italy
United States
Weight
(Switzerland)
Weight
(US)
Total
-0.2%
0.8%
0.5%
0.7%

Read More »

SNB Sight Deposits November 7: No interventions, EUR/CHF under 1.08 with political jitters

Headlines Week November 04, 2016:  No interventions, EUR/CHF under 1.08 with political jitters
Sight Deposits: show that the SNB has not intervened to sustain the euro, that dipped under EUR/CHF 1.08. We considered the 1.08 as line in sand for the SNB.
FX: The odds of Trump are rising. This causes fear and demand for Swiss Franc. The EUR/CHF fell to 1.0750.

Euro/Swiss Franc FX Cross Rate, November 07(see more posts on EUR/CHF, ). Source: markets.ft.com – Click to enlarge

Speculative Positions
Speculators were net short CHF January 2015, shortly before the end of the peg, with 26K contracts.
Then again in December 2015, when they expected a Fed rate hike, with 25K contracts.
We see these net short levels reached

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FX Weekly Review, October 31 – November 04: Dollar at Crossroads

Swiss Franc Currency Index
As visible in the graph, the Swiss Franc index recovered most of its losses against the US Dollar Index for the last 30 days.
In the last 30 days, both the USD currency index and the CHF currency index have had a positive performance. The USD dollar index still with a +1%, while the CHF index is finally slightly in positive territory.
Clearly the major reason, is a new 6 month low on EUR/CHF, when the 1.08 line in sand got broken.

Trade-weighted index Swiss Franc, November 04, 2016(see more posts on Swiss Franc Index, ) Source: FT.com – Click to enlarge
Swiss Franc Currency Index (3 years)
The Swiss Franc index is the trade-weighted currency performance (see the currency basket)

On

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Weekly Speculative Positions: Rising Net Short Euro and CHF, but Stronger Euro and CHF

The weekly speculative position shows increasing short positions on the euro and on the Swiss Franc. On the other side, both currencies have appreciated, what they should not do if net short positions increase. Therefore there is a different phenomenon.  Real money, .e.g in the form of cash, bonds, stocks or real estate that is invested in the euro area or in Switzerland. For Switzerland, we will see this in the weekly sight deposits.

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In a reporting period that covered a narrowing of the US Presidential polls and the run-up to FOMC meeting and US employment data, speculators made only small

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Swiss National Bank Results Q3 / 2016: Volatility of Results is Increasing

From the official news release

Interim results of the Swiss National Bank as at 30 September 2016

The Swiss National Bank (SNB) reports a profit of CHF 28.7 billion for the first three quarters of 2016.
A valuation gain of CHF 7.5 billion was recorded on gold holdings. The profit on foreign currency positions amounted to CHF 20.3 billion.
The SNB’s financial result depends largely on developments in the gold, foreign exchange and capital markets. Strong fluctuations are therefore to be expected, and only provisional  conclusions are possible as regards the annual result.

The increasing volatility of SNB Results
The last  formulation gives the impression that the annual results are definite. But the SNB may

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SNB Line in Sand Breaks, EUR/CHF under 1.08

We have always emphasized that the SNB intervenes between 1.08 and 1.0850. Even if there was no change in sight deposits the 1.08 “line in sand” broke.

Via ForexLive
US election jitters kicked in yesterday as concerns grow on the fall-out and we’ve seen a sharp rise in the franc across the board
EURCHF yesterday fell through 1.0800 which has been widely perceived as the SNB unofficial CHF cap but they’ve been notable by their absence.
USDCHF has fallen further to 0.9712 this morning dragging EURCHF down to 1.0754.
So is 1.0700 the new 1.0800? or 1.0750 even?
Fwiw my take is that the SNB are fearing further carnage next week post-election and deciding not to jump in too soon. Plus CB intervention is always more

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FX Weekly Review, October 24-28: October Surprise Pushes Open Door

Swiss Franc Currency Index
The Swiss Franc showed some improvement at the end of the week, when recovered some of the losses seen this month.

Trade-weighted index Swiss Franc, October 28, 2016(see more posts on Swiss Franc Index, ) – Click to enlarge

Swiss Franc Currency Index (3 years)
The Swiss Franc index is the trade-weighted currency performance (see the currency basket)

On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 33% of the SNB portfolio and 25% of Swiss exports (incl. countries like China or Arab countries that use the dollar for exchanges).

Contrary to popular believe, the CHF index gained only 1.73% in 2015. It

Read More »

Weekly Speculative Positions: Net Short CHF Position is Increasing

The net short Swiss Franc position against the dollar has risen to levels seen before the breakdown of the EUR/CHF floor.
Short CHF has increased from short 9.4 K contracts to 16.4 K contracts. Before the end of the peg, in December 2014, speculators  were short CHF by 20-25 K contracts. This big short position got repeated only once at the end of 2015, when the Fed was supposed to hike rates, but finally did not.

In the last week, speculators raised their short positions by 15% for both the euro and CHF. Euro longs against USD were up slightly, while CHF longs were reduced.
Choose the Swiss Franc for CHF speculative postion

It is difficult to discern an overall pattern among the changes in speculative

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FX Weekly Review, October 17-21: Golden Cross in Dollar Index and Deadman’s Cross in the Euro

Swiss Franc Currency Index
The Swiss Franc index was lagging once again compared to the dollar index. The dollar index is up exactly 3% this month, while the CHF index is down 2%.
The EUR/CHF has reached the SNB intervention area at the “new floor area of 1.08 to 1.0850. On Monday we will learn about the latest SNB interventions in our weekly sight deposits.

Trade-weighted index Swiss Franc, October 22 2016(see more posts on Swiss Franc Index, ). – Click to enlarge

Swiss Franc Currency Index (3 years)
The Swiss Franc index is the trade-weighted currency performance (see the currency basket)

On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar

Read More »

Swiss Quarterly Trade Surplus over 10 bn CHF for the First Time. Exports + 8.1 percent YoY, Imports +7.9 percent in Q3/2016.

We do not like Purchasing Power or Real Effective Exchange Rate (REER) as measurement for currencies. For us, the trade balance decides if a currency is overvalued.  Only the trade balance can express productivity increases, while REER assumes constant productivity in comparison to trade partners.
On the other side, a rising trade surplus may also be caused by a higher savings rate while the trade partners decided to spend more.
To control the trade balance against this “savings effect”, economists may look at imports. When imports are rising at the same pace as GDP or consumption, then there is no such “savings effect”.
In the third quarter of 2016, the Swiss quarterly trade surplus rose over 10 bn. CHF for the

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FX Weekly Review, October 10-14: Rates Still Key to Dollar’s Outlook

Swiss Franc Currency Index The Swiss Franc index had once again a bad stance against the dollar index. The CHF index was down 1%. The dollar index, however, improved. Trade-weighted index Swiss Franc, October 15 2016 (see more posts on Swiss Franc Index , ) . – Click to enlarge Swiss Franc Currency Index (3 years) The Swiss Franc index is the trade-weighted currency performance (see the currency basket ) On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 33% of the SNB portfolio and 25% of Swiss exports (incl. countries like China or Arab countries that use the dollar for exchanges). Contrary to popular believe, the CHF index gained only 1.73% in 2015. It lost 9.52% in 2014., when the dollar (and yuan) strongly

Read More »

Swiss Producer and Import Price Index, September 2016: +0.3 percent MoM, -0.1 percent YoY

The Producer Price Index (PPI) or officially named "Producer and Import Price Index" describes the changes in prices for producers and importers. For us it is interesting because it is used in the formula for the Real Effective Exchange Rate . When producers and importers profit on lower price changes when compared to other countries , then the Swiss Franc reduces its overvaluation. The Swiss PPI values of -6% in 2015 (see below), compared to -3% in Europe or -1% in the U.S., diminished the overvaluation. See more in Is the Swiss Franc overvalued? . Producer and Import Price Index in September 2016 From the data release of Swiss Statistics: 0.3% rise in Producer and Import Price Index Neuchâtel, 14.10.2016 (FSO) – The Producer and Import Price Index rose in September 2016 by 0.3% compared

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Swiss real and minimum wages increase by 0.4% and 0.7% respectively

Swiss social partners signing the collective labour agreements (CLA) have agreed a nominal rise in real wages estimated at 0.4% for 2016, of which 0.2% is to be awarded collectively and 0.2% at individual level. Minimum wages were increased by 0.7%. The graph shows nominal wages since 1993. Changes in Swiss Nominal and Minimum Wages Changes in Swiss Nominal and Minimum Wages – Click to enlarge Download this press release from Swiss Statistics (pdf, 129 KB) German Text: Gesamtarbeitsvertragliche Lohnabschlüsse für 2016 Die Effektiv- und Mindestlöhne werden um 0,4 bzw. 0,7 Prozent angehoben Neuchâtel, 05.10.2016 (BFS) – Die unterzeichnenden Sozialpartner der Gesamtarbeitsverträge (GAV) haben für das Jahr 2016 eine nominale Effektivlohnerhöhung von schätzungsweise 0,4 Prozent beschlossen.

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Fragenkatalog für Privathaftpflichtversicherungen

Privathaftpflichtversicherungen in der Schweiz sind sehr intransparent. Oft steckt der Teufel im Detail, irgendwo in den AGB. Zum Abschluss einer neuen Versicherung sende ich diesen Fragebogen zu verschiedenen Anbietern. Bei den meisten Fragen bitte Ja oder Nein einfüllen, wenn die “generelle Deckungssumme” erstattet wird. Sollte eine reduzierte Deckungssumme anwendbar sein, dann bitte einfüllen.  Die mit * gekennzeichneten Elemente haben oft eine reduzierte Deckungssumme. Sollte eine Zusatzversicherung erforderlich sein, bitte kennzeichnen. Bei Unklarheiten sehen Sie weitere Erläuterungen zu diesen Fragen unter diesem Link   Betrag bzw. Versichert? Reduzierte Deckungssumme Einschränkungen Ist Option/ Prämie für die Option Spezielle Selbstbeteiligung Generelle Deckungssumme für Sachschäden

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FX Weekly Review, October 03-07: Dollar Profits on Strong ISM Index

Swiss Franc Currency Index The Franc index lost considerably in the last week, in particularly in comparison to the dollar index. Reason was the exceptionally strong U.S. ISM Non-Manufacturing Index . Marc Chandler speaks about the jobs report that is rather a lagging indicator,  but I like to focus on the leading index., the ISM. My view is confirmed by the stronger dollar that reflect the ISM index, but not the mediocre job figures. Trade-weighted index Swiss Franc 1 Month (see more posts on Swiss Franc Index , ) – Click to enlarge Swiss Franc Currency Index (3 years) The Swiss Franc index is the trade-weighted currency performance (see the currency basket ) On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 33% of

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FX Weekly Review, September 26-30: Dollar vulnerable at the Start of Q4, CHF collapses at Quarter End

Summary The US dollar fell against most of the major currencies in Q3.    The Norwegian krone was the best performer, gaining 4.4% against the greenback.  It was helped by higher oil prices and a shift away from an easing bias by the central bank.  The relatively high interest rates offered by Australia and New Zealand underpinned their currencies, which gained 2.7% and 2.0% respectively. The dollar rose against three major currencies.    Sterling cannot get out of its own way, even though the economic data has been mostly better than expected.  Sterling lost 2.5% in Q3 after a 7.3% drop in Q2.  The Swedish krona fell 1.5% in Q3 after falling 4.0% in Q2.  The central bank is insisting on an aggressively easy monetary policy despite solid growth and rising price pressures. The Canadian

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Swiss Exports + 7.0 percent YoY, Imports +8.4 percent. Trade Surplus +3 bn CHF, Exporters Increase Prices

We do not like  Purchasing Power or Real Effective Exchange Rate (REER)  as measurement for currencies. For us, the trade balance decides if a currency is overvalued.  Only the trade balance can express productivity increases, while REER assumes constant productivity in comparison to trade partners. On the other side, a rising trade surplus may also be caused by a higher savings rate while the trade partners decided to spend more. To control the trade balance against this “savings effect”, economists may look at imports. When imports are rising at the same pace as GDP or consumption, then there is no such “savings effect”. The Swiss trade balance in August looks extremely healthy: Swiss exports were up 7.0% against August 2015 (in real terms: + 1.2%) and imports 8.4% (in real terms: +

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FX Weekly Review, September 12 – September 16: Bad week of CHF Index against Dollar Index

This week we focus on the charts, we omit the technical explanations, given that Marc Chandler is currently on a two-weeks trip. The dollar was surprisingly strong this week. This despite a more hawkish ECB, bad U.S. economic data in the ISM surveys. Swiss Franc Currency Index The Swiss Franc index had a bad week with a bad Friday. The dollar index rose at the end. Swiss Franc Index Trade-weighted index Swiss Franc 1M (see more posts on Swiss Franc Index , ) Swiss Franc Index Trade-weighted index Swiss Franc 1M, Click to enlarge. Swiss Franc Currency Index (3 years) The Swiss Franc index is the trade-weighted currency performance (see the currency basket ) On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 33% of the

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Speculators continue reducing Euro shorts

Swiss Franc Speculators are reducing their net short Euro positions, since Draghi’s comments on inflation. Apparently not only against the dollar but also against the Swiss Franc. This also means that the euro zone may be target real money (like purchases of stocks, real estate and bonds) instead of Switzerland. This makes both European stocks and a Euro long FX position interesting. With a stronger euro, purchases of Swiss stocks could also be an idea. The net long CHF position of against USD did barely change. It is not +1.3K positions. The dollar got stronger against the euro this week. With potential interest hikes, real money in the form of cash seems to flow into USD. This continues to be a drag on US exports and the profits of U.S. based companies. This is the reason why we prefer

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FX Weekly Review, September 05 – September 09: Dollar Proves Resilient as Market Rates Rise

Swiss Franc Currency Index The Swiss Franc index remained mostly unchanged during the last week: Some gains against the dollar, but losses versus the euro. Since Tuesday the euro moved upwards against CHF. Given that Swiss GDP was stronger than the one in the euro zone, this is surprising. But we must recognize that Draghi could be the reason. Inflation forecasts of 1.2% in 2017 and 1.8% in the euro zone would mean the ECB hikes rates maybe in 2018 or 2019. I personally do not believe it, given that wage inflation in Italy or Spain is clearly under 1%. This is lower than Swiss wage inflation of 0.8% . The second reason for the stronger euro is euro short covering: Against both dollar and CHF. Speculators were net long CHF against USD, while they are net short on the euro. Click to enlarge.

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Swiss Exports + 7.9 percent YoY, Imports +11.8 percent. Trade Surplus +2.9 bn CHF.

Exports and Imports YoY Development
In July 2016, Swiss exports declined due to two working days less. Adjusted for this difference, exports were up 7.9% YoY (in real terms: + 2.4%) and imports 11.8% YoY (in real terms: + 8.2%).
Exports and Imports MoM Development 
Compared with June 2016, seasonally adjusted exports rose by 3.5% (in real terms: + 5.5%). Thus the positive trend that began in mid-2015 continues. Imports up 11.8% year on year (real: + 8.2%). In seasonally adjusted terms (compared the previous month), they showed growth of 9.1% (real terms: + 9.2%), confirming their upward trend of previous months.

 

Click to enlarge. From Swiss Customs

Trade Balance
The trade balance was in surplus of 2.93

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FX Weekly Review, August 15 – August 19: Swiss Franc index improves 5% compared to dollar index

Swiss Franc Currency Index
The Swiss Franc index gained nearly 3% last week, while the dollar index lost over 2%. This gives a total gain of 5%.

Swiss Franc Index
(see more posts on Swiss Franc Index)
Click to enlarge.

Swiss Franc Currency Index (3 years)
The Swiss Franc index is the trade-weighted currency performance (see the currency basket)
On a three years interval, the Swiss Franc had a weak performance. The dollar index was far stronger. The dollar makes up 40% of the SNB portfolio and of Swiss exports.
Contrary to popular believe, the CHF index gained only 1.73% in 2015. It lost 9.52% in 2014., when the dollar (and yuan) strongly improved.

Click to enlarge.

USD/CHF
The improvement of Swiss

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Swiss market lower this week as US stocks reach new record highs

SMI
The Swiss Market Index is set to close lower this week underperforming global equities as US stocks reached new record highs and emerging markets outperformed on a weaker dollar.

Click to enlarge.
Oil also made further gains this week as investors bet that talks between OPEC members and other producers may result in action to stabilise the market in the coming weeks.

Click to enlarge.

Japan
The week began with some gloomy economic data after reports showed on Monday that Japan’s second quarter GDP growth slowed more than forecast to 0.2%, reflecting a drag on exports from a stronger JPY and a drop in business investment. In Europe, the final release of second-quarter GDP showed that growth halved to 0.3%

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Why Switzerland’s franc is still strong in four charts

A very insightful post from Bloomberg. We added some more explanations. We explained that the dollar is currently more overvalued than the Swiss Franc.

Swiss National Bank President Thomas Jordan keeps saying the franc is “significantly overvalued.” And that’s despite the central bank’s record-low deposit rate and occasional currency market interventions.
While the franc is typically a top choice for foreign investors looking for a safe place to park their money, anxieties about the euro area’s debt burden or Brexit aren’t the only factor. The residents of Switzerland — which has a sizable current-account surplus despite its strong currency — are partly to blame because they aren’t moving money abroad, which

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The Fundamentals behind Gold Price Seasonality

In the Six Major Fundamental Factors that Determine Gold and Silver Prices we have learned that prices of gold and silver  represent the growth difference between Europe and the Emerging Markets on one side and the United States on the other. When th…

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Household Savings Rate Compared

We critized GDP growth that in many Western economies (e.g. Greece) has become mostly an indicator of consumption and activity. We emphasized that GDP growth in the form of consumption-driven (hyper-) activity (aka Bawerk’s “GDC” Gross Domestic Consu…

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The relationship between CHF and gold

Many people think that Switzerland is related to gold due to its inflation-hedging safe-haven status. Historically this is true. With rising U.S. inflation in the 1970s gold appreciated to record-highs. So did the German Mark and even more the Swiss …

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Get Your Swiss Domicile

SNBCHF offers you the possibility to obtain a Swiss domicile. Room to let in the tax haven Freienbach, Canton Schwyz. Tax Rate Corporations: 11.7% Highest Marginal Tax for Individuals: 19% Average Tax for Individuals (income 200K): 10%

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SNB Intervenes during Brexit Turmoil

During the Brexit turmoil on Friday, the Swiss National Bank has intervened in markets. Just after they got into the office, at 7.45 am CET, they started the interventions. Apparently the Singapore office did not have a mandate to do interventions.

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Brexit and what if means for the Bank of England

“Some market and economic volatility can be expected as this process unfolds,” Carney said in a televised statement in London after the referendum result. His comments followed Prime Minister David Cameron’s announcement that he will step down this y…

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FX Daily, June 21: CHF Strongest Currency Again

The Swiss Franc was the strongest currency. The euro fell from 1.0877 to 1.0808. Two fundamental reasons: The US dollar remains heavy against most of the major and emerging market currencies today as the pullback that began at the end of last week co…

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Swiss GDP Q1/2016, more Insights

Key points:   Bern, 01.06.2016 – Switzerland’s real gross domestic product (GDP) grew by 0.1% in the 1st quarter of 2016.GDP was underpinned by consumption expenditure from private households and investments in construction and equipment but curbed s…

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BSI: The End of a Swiss Private Bank

Authorities in Switzerland and Singapore are punishing BSI, the private bank based in the Ticino region of Switzerland, for alleged money-laundering offenses, shutting their activities in Singapore and seizing part of its profits.

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April 2016: SNB running suicide again?

Speculative position: Speculators are even longer CHF:  +9410x 125K contracts.Sight Deposits: SNB intervenes for 6.4 bln. CHF in only three weeks. Sight deposits (aka debt) are rising by 1% per month, this is 12% per year. The SNB can never achieve s…

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History of Bank of Japan Interventions

We show the history of Japanese FX interventions. The Japanese only intervened when the USD/JPY was under 80. Therefore the 2016 FX intervention threads at 108 are ridiculous.As opposed to the Swiss National Bank, the Japanese only talk, they do not …

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SNB Monetary Policy Assessment and Critique

We examine the SNB monetary assessment statement of March 17 and the Swiss economy. We explain why negative rates may be a “toothless measure” if a central bank wants to weaken a currency. They have rather an inexpected consequence, they slow down GD…

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Swiss GDP and Swiss Franc Shock Propaganda

For the Swiss press, 2015 has been the year of the “Swiss franc shock“. Based on the GDP release from the Swiss ministry of economics (SECO), we wanted to know what in the Swiss economy got really “shocked”. The following table compares the Swiss GDP…

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Weak CHF during the Fat Years of the Joseph Cycle

In December 2015, the seven year Joseph cycle ended with a Fed rate hike. These lean years of the Joseph cycle started in December 2008 when the Fed lowered rates to the current level. We think that in the next seven year cycle, even the risk-averse …

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Weak CHF during the Fat Years of the Joseph Cycle

In December 2015, the seven year Joseph cycle ended with a Fed rate hike. These lean years of the Joseph cycle started in December 2008 when the Fed lowered rates to the current level. We think that in the next seven year cycle, even the risk-averse …

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Economic Forecasts: Swiss Banks were too Optimistic

Our analysis of the forecasts of economic data for 2015 shows that the Swiss banks were too optimistic for most data. US growth, the oil price, inflation and interest rates were far lower in 2015 than they expected. The forecast errors for stock indi…

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Monetary assessment meeting Swiss National Bank

#Jordan negative inflation rate only temporary, caused by oil and price adjustments of imported goods, globally also low inflation #CHF #SNB — George Dorgan (@DorganG) December 10, 2015 #jordan Swiss sovereign money initiative means a complete change…

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Government bond yields by country and maturity

We provide a quick starter with links to Bloomberg and Investing.com to find out bond yields and bond future price for the most important government bonds.
Read also:
Is the Safe-Haven Government Bond Bubble finally Bursting?
What Drives Government…

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Keith Weiner’s Page: Gold Standard etc.

Jackson Hole: Cherry Flavored Cyanide, or Strawberry
The American Principles Project and the Atlas Network Sound Money Project, provided a much needed alternative in the Jackson Hole Summit.

Move Over Entrepreneurs, Make Way for Speculation!
The …

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CHF

Newest Updates:

Overview:

Articles on the drivers of the CHF Exchange Rate:
An article written in February 2012 that summarizes many of those points in an earlier version: It predicted that the euro would not rise against CHF and that the commodit…

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SNB

Swiss National Bank, the Most Relevant Pages
Click here for the multi-media version of this page on the social media site Scoop It.

The chapter on the SNB has the following sections (click open):
Recent articles and updates:

Older posts about the…

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What Drives Government Bond Yields?

For us the five major drivers of government bond yields are:
Inflation expectations and inflation:  The by far most important criterion. High inflation expectations must be compensated via higher bond yields. The main driver behind inflation expectat…

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What Drives Government Bond Yields?

For us the five major drivers of government bond yields are:
Inflation expectations and inflation: The by far most important criterion. High inflation expectations must be compensated via higher bond yields. The main driver behind inflation expecta…

Read More »

What Drives Government Bond Yields?

For us the five major drivers of government bond yields are:
Inflation expectations and inflation:  The by far most important criterion. High inflation expectations must be compensated via higher bond yields. The main driver behind inflation expectat…

Read More »

The Euro Glut: The Summer 2015 Update

One of the first to use the word “euro glut” was Deutsche Bank’s George Saravelos. His idea of the euro glut is that European banks and investors drive the euro down despite the massive European current account surplus and the high European household…

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The Euro Glut: The Summer 2015 Update

Deutsche Bank’s George Saravelos was one of the first to use the term “euro glut”. He anticipated a massive capital outflow from Europe that countered the huge European current account surplus. The Euro glut also led to the end of the EUR/CHF peg. Re…

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SNB interventions June 2015

Overview:
Sight deposits are currently the by far most important means of financing for SNB currency purchases, for interventions. Sight deposits are assets for commercial banks, the Swiss confederation and other counterparties that deposit money at …

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SNB interventions June 2015

Latest update for June 2015: The pace of SNB intervention is slowing. Sight deposits, the indicator for SNB interventions, rise by 0.5 billion francs per week.
April and May: Sight deposits rise by 1.5 billion CHF per week. Thanks to this interventio…

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Development of European Bond Yields

We show the monthly development of government bond yields over years, thanks to a table from the ECB.

Click to expand, source ECB

Disinflation in the Euro zone depresses bond yields everywhere, 2014 versus 2013
June 2014:

By July 2013, governme…

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Swiss Real GDP Rises by 15% … in Euro Terms

George Dorgan shows that Gross Domestic Product (GDP) is a measurement in the local currency. Effectively, Swiss real GDP rose by 15% in Euro terms, but fell slightly in CHF. He also emphasizes that Switzerland needs a big rebalancing of its economy,…

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Interest – Inflation = #REF

I have to admit that I derive some pleasure in taking on hoary old myths. For example, some economists assert that the interest rate you see on the Treasury bond is not real. You see, it’s only nominal. To calculate the real rate, they say you must a…

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The two phases of CHF appreciation

We show the two phases or “two innings” of Swiss franc appreciation: The risk aversion game and the inflation game.
With the weakening of emerging markets and the strengthening of the United States in 2013/2014, the Swiss National Bank (SNB) had won …

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They’re Coming to Take Away Your Cash

The stories are all over the Internet. Governments are forcing us into a cashless society. Supposedly the pretext is terrorism, and the real reason is to take more control. No doubt more power appeals to politicians, and banning cash seems like the n…

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How Could the Fed Protect Us from Economic Waves?

Mainstream economists tell us that the Federal Reserve protects us from economic waves, indeed from the business cycle itself. In their view, people naturally tend to go overboard and cause wild swings in both directions. Thus, we need an economic ce…

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Rising Sight Deposits at SNB Means Rising SNB Debt

Money creation and sight deposits may have two points of view:
1. The central bank creates money – i.e. the SNB decides to increase sight deposits when it does currency interventions
2. Commercial banks create money – inflows in CHF on Swiss bank acc…

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SNB’s IMF data

This IMF data on the SNB website shows SNB Forex and gold reserves in the last month. It is so-called “IMF Special Data Dissemination Standard (SNB Data)”

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