Will haven allure be enough to keep the franc attractive amid wealth tax?

The SNB tweaking its sight deposits rate threshold yesterday sees lenders start planning to charge wealthy clients for deposits

EUR/CHF D1 20-09

  • Credit Suisse will charge rich clients for Swiss franc deposits

It is being reported (⬆️) that Credit Suisse is looking to start charging for franc deposits after the SNB decision yesterday, following the footsteps of UBS who already said that it would introduce negative rates for clients holding more than 2 million francs in their accounts.

Essentially, the move is to try and mitigate the costs of deepening negative rates but at the same time it could hurt flows into the Swiss economy if big money funds aren't willing to pay the price for storing their money in the country.

The question that needs to be answered here is "are deeper negative rates going to push flows away from the franc?".

I reckon that is one markets need to balance out amid the global backdrop that is continuing to favour more defensive/safer assets. The franc is among one of those alongside the yen and gold to name a few of the obvious ones.

I reckon something between 0.1% to 0.4% would be a small price to pay if you look at the big picture and consider how global economic developments would be headed.

I mean it's not to say that there are many other attractive alternatives if you look across asset classes these days. Over ~$17 trillion worth of debt are negative yielding anyway.

The only fear is that the SNB may cut rates further and you'd be punished even more for keeping deposits in the country. But as mentioned, it could be a small price to pay in the long-run if you bank on the fact that the franc will appreciate amid haven demand.

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Dollar sluggish ahead of European markets open

The pound continues its good form after the breakout overnight

WCRS 20-09

Markets are steadily grinding towards the end of the week with the dollar holding slightly weaker against European currencies as well as the yen today.

EUR/USD trades within a 20 pips range still but is near the upper extreme ahead of European trading while the pound is continuing its run higher after cable broke above key resistance levels around the 1.2500 handle in overnight trading.

The yen is holding firmer amid weaker Treasury yields, with 10-year yields down by ~2 bps to 1.765% currently. Equities are looking more flat so overall risk sentiment remains more measured in my view.

Just be reminded that the yen and franc both gained yesterday after respective central banks left monetary policy unchanged so the "bend until it breaks" play is still part and parcel of what's weighing into sentiment currently.

Other major currencies aren't really doing much as they trade mixed against the dollar, which in itself is a bit sluggish ever since the FOMC meeting.

Markets are still in search for fresh direction and there's still no clear lead as to what that may be with equities erasing overnight gains on faltering trade optimism while the bonds stay fixated on the repo/funding issue - something I will post about in the next hour.

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Canada August ADP employment +49.3K vs +73.7K prior (revised to 30.2K)

August Canadian employment survey from ADP

ADP canada data

  • Prior was +73.7K (revised to +30.2K)

  • Trade/transport and utilities +17.9K

  • Education and healthcare +15.2K

  • Manufacturing +4.5K

  • Natural resources and mining -5.1K

There have been big revisions in the prior for the past two months, both downward after strong headlines. If you zoom out, the past two months have been solid but the year as a whole is just ok. 

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OECD sees global economy slipping towards weakest growth in a decade

OECD cuts forecasts to the global economy, warns of entrenched uncertainty


  • 2019 global GDP growth at 2.9% (previously 3.2%)

  • 2020 global GDP growth at 3.0% (previously 3.4%)

  • 2019 US GDP growth at 2.4% (previously 2.8%)

  • 2020 US GDP growth at 2.0% (previously 2.3%)

  • 2019 China GDP growth at 6.1% (previously 6.2%)

  • 2020 China GDP growth at 5.7% (previously 6.0%)

  • 2019 Eurozone GDP growth at 1.1% (previously 1.2%)

  • 2020 Eurozone GDP growth at 1.0% (previously 1.4%)

  • 2019 Japan GDP growth at 1.0% (previously 0.7%)

  • 2020 Japan GDP growth at 0.6% (unchanged)

  • 2019 UK GDP growth at 1.0% (previously 1.2%)

  • 2020 UK GDP growth at 0.9% (previously 1.0%)

Those are quite the amount of downgrades relative to its May forecast.

OECD says that trade tensions are the main cause for a more fragile and uncertain outlook to the global economy. Noting that intensifying trade conflicts and governments not doing enough to prevent damage will hurt global growth momentum going into next year.

The 2.9% forecast for global growth this year is the weakest projection since the financial crisis, almost a decade ago.

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GBPUSD keeps above it's 100 hour MA, but below the 100 day MA too.

GBPUSD corrects lower after run above 100 day MA runs out of steam

The GBPUSD moved above its 100 day moving average yesterday for the 1st time since May 2019. That moving average currently comes in around the 1.2497 level. Today, the price moved below that moving average level early in the Asian session. It had one test but stayed below it as traders leaned with a bearish bias.

GBPUSD corrects lower after run above 100 day MA runs out of steam

The price action in the London session took the pair close to its 38.2% retracement of the last trend move higher from the low from last Thursday at the 1.2433 level (at 1.2433). The rising 100 hour moving average is also currently near that level (blue line in the chart above). 

Recall from yesterday's trading that the 100 hour moving average stalled the fall before turning around and rising sharply into the New York afternoon session (and above that 100 day moving average - see chart above)).  Staying above the 100 hour MA,  keeps the bulls more in control, while a break below should solicit stops and more selling pressure. The 200 hour moving average (green line in the chart above) would be the next target at 1.2382 area.  

We currently trade at 1.24696 and near New York session highs despite the better than expected housing data (12 year highs for both housing starts and building permits). The 1.2475 level was a swing high going back to Friday and would be the next minor target to the topside. The 100 day moving average is more important at 1.24972.

Although the buyers continue to hold a little more control off the hourly chart, the daily chart's 100 day moving average up at 1.24972 is also a key barometer going forward.  Staying below keeps the sellers more in control from that perspective.  

Traders have to respect each technical bias and trading so far today is doing just that. Look for the break and momentum either above the 100 day moving average or below the 100 hour moving average to tilt that traders respect in the direction of the break.

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Cable falls to session low amid softer inflation data, firmer dollar

GBP/USD touches a low of 1.2439 on the day

GBP/USD H1 18-09

Price is closing in on a test of the 100-hour MA (red line) once again, this time @ 1.2130. It's a bit of a tricky one for cable now as buyers still hold near-term control but the double-top just above 1.2500 presents a technical setup for potential shorts.

That said, all will hinge on the Fed decision later today.

For now, the softer UK inflation data earlier is triggering some downside in the pound and extended dollar strength on the session has helped to see the pair slip to a low of 1.2439.

That said, unless price starts breaking below key near-term levels in the form of the 100-hour MA @ 1.2130 and the 200-hour MA (blue line) @ 1.2380, then buyers are very much still "in the game" as we await the Fed.

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UK supreme court begins hearing on prorogation of parliament

The hearing is to last at least three days


The judges will have to deal with appeals from the Scottish court, the English high court, as well as the Northern Irish court in determining whether Boris Johnson acted lawfully in proroguing parliament until 14 October.

I don't think this is a real game changer for the pound as the prorogation was meant to prevent lawmakers from getting a Brexit delay bill turned into law - which still happened anyway.

But you'll never know how the ruling may affect the future of Boris Johnson so just keep an eye on the matter at hand just in case.

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EUR/USD sellers reclaim near-term control, what's next?

EUR/USD near-term bias is more bearish since overnight trading

EUR/USD H1 17-09

The shift in near-term bias comes as sellers broke below the 100 and 200-hour MAs (red and blue lines respectively) yesterday in a move to test the 1.1000 handle.

Currently, the downside move is running into support around the figure level with the 61.8 retracement level @ 1.0997 providing added support for the time being.

So, what's next for the pair?

Sellers may have seized near-term control again but with the Fed meeting tomorrow, price could potentially sit in this area (further support around 1.0985) close to 1.1000 before finding more direction this week.

Risks to any downside move from here can be defined and limited by the key hourly moving averages close to 1.1040 while any further downside extension requires a firm break below 1.1000 - and preferably 1.0985 - to see a potential test of lows around 1.0926-27.

Of note, there are also large expiries rolling off at 1.1000 today (€856m) and tomorrow (€1.6bn) so that may factor into price action being a bit more "sticky" at current levels ahead of the Fed decision tomorrow.

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Aussie loses yields tailwind as upside momentum fades

AUD/USD trades at the lows for the day to begin the European morning

AUD/USD D1 17-09

The upside bounce in the pair appears to have run its course after meeting resistance at the 50.0 retracement level @ 0.6880 and failing to move above 0.6900 to challenge the 100-day MA (red line) in the past week.

The daily chart above doesn't inspire any confidence whatsoever as price has been making lower highs consistently ever since December last year. The high this month would mark the fifth consecutive sequence of that.

That's never a good sign if you're leaning towards the bullish side of a currency. Add to the fact that the yields spread divergence and has now converged:

AU yields

There is a strong argument for AUD/USD to potentially get a stronger nudge lower if things fall into place this week i.e. less dovish-than-expected Fed tomorrow and softer Australian jobs report on Thursday.

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ECB's Lane: Convergence of inflation towards aim has recently slowed, partly reversed

ECB chief economist, Philip Lane, speaks in London

  • ECB mandate for price stability is unconditional

  • Incoming information signals more extended slowdown in Eurozone growth dynamics

  • This slowdown is mainly due to external developments

  • Forward guidance is a very powerful instrument, remains our principal tool

  • The case for monetary policy response was clear

  • ECB can do QE within current limits for an extended period

  • ECB policies create a cushion to insulate the economy from the materialisation of downside risks

  • Full speech

Nothing new on offer here from Lane. He's essentially just reiterating the baseline view adopted by the central bank at its decision last week. There will be a Q&A session to follow after his speech so perhaps there will be more 'juicy' remarks to come.

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