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Swiss Bank Group Lambasts Negative Rates for Damaging the Economy

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 The Swiss Bankers Association criticized the central bank’s policy of negative rates, saying it was causing “massive structural damage” to the economy.

At -0.75%, the Swiss National Bank’s policy rate is the lowest in the G-10 as the central bank tries to stem appreciation pressure on the haven franc. With momentum flagging, euro-area officials are likely to announce a further cut to already sub-zero interest rates later on Thursday and may also announce new asset purchases. That could prompt the SNB to deliver a rate cut of its own.

In addition to hampering Swiss banks’ competitiveness internationally, negative interest rates are “result in bubbles and damage the competitiveness of the Swiss economy long term because they keep unprofitable companies alive artificially,” the sector representative said. “Negative interest rates also put the pensions of Swiss citizens at risk. A further lowering of interest rates would further exacerbate this issue.”

Unlike neighboring Italy, Switzerland hasn’t struggled with non-performing loans on banks’ balance sheets. SNB President Thomas Jordan has also said that it’s low real interest rates globally that are making life difficult for savers.

The SNB’s next policy announcement is scheduled for Sept. 19.


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EUR/GBP Forecast: Euro in the Crosshairs, Can the ECB Deliver on Stimulus?

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EUR/GBP Exchange Rate Muted ahead of ECB Rate Decision

The Euro Pound (EUR/GBP) exchange rate remains rangebound this morning as markets brace for what could be an explosive policy decision by the European Central Bank (ECB) this afternoon.

At the time of writing EUR/GBP exchange rate is almost unchanged from this morning’s opening levels, leaving the pairing trading at around £0.8947.

Can the ECB Live Up to Market Expectations?

All eyes are on the European Central Bank today as it prepares to deliver what could be its most important policy decision in years.

Growth in the Eurozone has slowed significantly in recent months, with the bloc’s manufacturing sector deep in contraction and Germany teetering on the edge of a recession.

As a result economists are expecting the ECB will looking to ease its monetary policy to spur growth, with the announcement of what has been billed as a ‘substantial’ stimulus package.

Expectations are high, but the question on everybody’s lips is what might the package include and if it be enough to lift the Eurozone out of the doldrums, with the risk of the Euro (EUR) falling if the measures disappoint.In a note to clients Commerzbank warned:

‘There is high uncertainty about the extent of the expansionary measures the ECB will implement today; and therefore there is large potential for strong fluctuations in the euro exchange rates.’

This comes amid signs that some members of the ECB’s governing council are resistant to the idea of reopening the ECB’s quantitative easing programme, having weaned the Eurozone economy off of bond purchases less than a year ago.


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Euro pauses before ECB meeting as trade thaw triggers risk rally

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The euro hovered near $1.10 on Thursday as traders waited to see the scale of fresh stimulus expected from the European Central Bank, while China's yuan and Australia's dollar were buoyed by further signs of a thaw in the U.S.-China trade war.

After a difficult August in which concerns about a global recession sparked a scramble into safer assets, investors have been returning to riskier markets this month, encouraged by China and the United States making moves to ease trade tensions and by receding fears of a no-deal Brexit.

China on Wednesday exempted a basket of U.S. goods from its tariffs, while U.S. President Donald Trump said in a tweet he would delay a scheduled tariff hike by two weeks in October.

Export-driven Asian currencies from Taiwan to Australia rallied on the buoyant mood as the world's two largest economies each granted concessions in their heated tariff dispute.

The Japanese yen, the go-to safe haven currency for nervous investors, fell to a six-week low against the dollar. The yen breached the 108 mark and was last at 107.98 yen per dollar, down 0.1% on the day and far from its seven-month high of 104.46 plumbed last month.

The Aussie hit a six-week high and the offshore Chinese yuan rose 0.5% to a three-week high of 7.0737 against the dollar.

Market attention now turns to the ECB, the first of a series of major central bank events, with the Federal Reserve and the Bank of Japan meeting next week.

Investors almost universally expect a rate cut at Thursday's ECB meeting as policymakers try to prop up the region's ailing economy.

The real uncertainty is whether policymakers will restart a quantitative easing program after some members of the governing council in recent weeks expressed doubt about the need to relaunch asset purchases.

SEB strategist Jussi Hiljanen said he expected the ECB to cut the deposit rate by 10 basis points, extend the forward guidance on rates by six months and announce the restart of a quantitative easing program with monthly purchases lower than the market anticipated.

"Such a package of stimulus measures would be a disappointment for the market, pushing long rates higher and EUR/USD higher and steepening the curve," Hiljanen said.

The single currency (EUR=EBS) has shed 3.5% since June and was steady at $1.1017 in early European trade.

The dollar was slightly lower against a basket of currencies at 98.599 (DXY).

Sterling was little changed (EURGBP=D3). The pound rocketed to a six-week high on Monday, reversing last week's losses as investors welcomed the British parliament's move to block a no-deal Brexit on Oct. 31.

Despite the more positive mood in risk assets this week, analysts expressed some caution about its sustainability."Just as the presidential tweet on tariffs this morning has injected more momentum ... we are only one social media posting away from a thoroughly unpredictable President turning sentiment on its head," said Jeffrey Halley, senior market analyst for Asia Pacific at brokerage OANDA.

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RBI creates database for stressed loans of NBFCs

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The Reserve Bank of India (RBI) has built a database of stressed non-banking finance company (NBFC) loans, similar to the Central Repository of Information on Large Credits (CRILC) that it has built for banks in 2014, sources privy to the developments told CNBC-TV18.

According to multiple people familiar with the development, the central bank has directed the NBFCs to inform the RBI database about SMA 1 and SMA 2 loans since last year.

SMA 1 refers to those loan accounts in which the instalment or interest is overdue for 1 month from 31st day to 60 days. SMA 2 refers to accounts in which the instalment or interest is overdue for 2 months from 61st days to 90 days.

For the past year or so, the data given by the NBFCs to the central bank is methodically arranged, plus the RBI has other data too, sources in the know told CNBC-TV18.

NBFCs, including housing finance companies (HFCs), came under stress following a series of defaults by the group companies of IL&FS in September last year.

India's fuel demand rose 2.8% YoY in August

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India's fuel demand rose 2.8 percent in August compared with the same month last year.

Consumption of fuel, a proxy for oil demand, totalled 17.04 million tonnes, data from the Petroleum Planning and Analysis Cell (PPAC) of the oil ministry showed.

Sales of gasoline, or petrol, were 8.9 percent higher from a year earlier at 2.57 million tonnes.

Cooking gas or liquefied petroleum gas (LPG) sales increased 13.0 percent to 2.40 million tonnes, while naphtha sales surged 3.7 percent to 1.15 million tonnes.

Sales of bitumen, used for making roads, were 23.8 percent up, while fuel oil use edged lower 15.9 percent in August.

3 reasons for EUR/USD to fall over the next 3 months

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I posted earlier on The 3 reasons EUR has bottomed against the USD and yen

An alternative viewpoint is for euro to fall.
Via Citi:
  1. in the near term, euro area activity remains very weak
  2. inflation low
  3. ECB may prepare another round of easing, probably at the 12 September, including more QE
More QE means, says Citi:
  • a negative net supply dynamic in the EA bond market
And, thereofe:
  • we lower our EUR/USD forecast 0-3m target from 1.12 to 1.08 level.


Forex - Yen Weaker, Euro Steady Ahead of ECB Meeting

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The yen was weaker on Wednesday as a cautious risk-on mood dampened safe haven demand, while the euro was steady ahead of the upcoming European Central Bank meeting on Thursday.

ECB policymakers are widely is expected to unveil a fresh wave of stimulus measures to shore up growth and inflation in the euro area economy, which has been hit by the escalating U.S.-China trade war and Brexit.

The ECB could set the tone for upcoming rate-setting decisions by the U.S. Federal Reserve and the Bank of Japan next week, and for the broader global risk appetite.

But concerns have been building that global central banks are reaching the limits of their stimulus options, especially those with negative interest rates and sub-zero long-term sovereign bond yields.

"Given the chance that the ECB fails to match market expectations for easing policy, the balance of risks favors higher EUR/USD and European FX outperformance," ING forex strategists said in an overnight note.

The euro was little changed against the U.S. dollar at 1.1043 by 02:38 AM ET (06:38GMT).

The dollar pushed higher against the yen, climbing 0.25% to 107.78.

Much of the positive mood in recent days has been driven by optimism that high-level talks between U.S. and Chinese negotiators next month can deliver some sort of trade-war breakthrough.

That was tamped down somewhat by White House trade advisor Peter Navarro on Tuesday, when he urged patience about resolving the two-year trade dispute between the world's two largest economies and said to "let the process take its course."

The British pound has managed to hold on to last week's gains after British parliament passed a law compelling Prime Minister Boris Johnson to seek a delay to the Oct. 31 date for leaving the European Union. Sterling last traded at 1.2365.

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AUD/USD stays on course for test of 100-day moving average

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AUD/USD trades at fresh six-week highs as we begin European trading

AUD/USD D1 11-09

The aussie got a boost earlier from the headline pertaining to China here and that saw AUD/USD hit a high of 0.6885 briefly. Currently, price is challenging resistance around 0.6880 from the 50.0 retracement level as seen above.

It has been a solid run for the pair over the past week and buyers don't look like they are letting up just yet.

The 100-day MA (red line) @ 0.6907 remains the key level to watch in all of this as a break above that will see buyers start to exert more control over the pair in the bigger picture. That will potentially put 0.7000 back on the map with the Fed to come next week.



PM Modi, K P Oli jointly inaugurate Motihari-Amlekhganj petroleum product pipeline

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Prime Minister Narendra Modi and his Nepal counterpart K P Sharma Oli on Tuesday jointly inaugurated the Motihari-Amlekhganj petroleum product pipeline via a video link.

The over 60 km-long pipeline is the first-ever cross-border petroleum product pipeline in the South Asia region, according to a video presentation made before the inauguration.

As of now, tankers carry petroleum products from India to Nepal as part of an arrangement which is in place since 1973.

"This India-Nepal energy cooperation project is a symbol of our close bilateral relations. It will help to enhance the energy security of the region and substantially cut down on transit costs," the Prime Minister's Office had said on Monday.

Forex - Euro Steady Ahead of ECB, Sterling Slides

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 The euro was holding steady on Monday as investors looked ahead to a European Central Bank meeting later this week at which new stimulus is expected, while the British pound was pressured lower by Brexit uncertainty.

The euro was little changed at 1.1029 03:41 AM ET (07:41 GMT) after falling 0.1% on Friday.

The ECB is all but certain to approve new stimulus measures on Thursday to boost an ailing economy, but the exact composition of the stimulus package is still unclear.

While an interest rate cut seems like a done deal the big question is whether a resumption of asset purchases will be part of the package after some policymakers said it would be premature.

Heightened expectations for ECB easing come as other global central banks move to ease monetary policy, including the People's Bank of China, which on Friday cut the amount of cash that banks must hold as reserves.

Policymakers are rushing to bolster growth as a wide-ranging dispute between the United States and China over trade policy drags into a second year, increasing the risk of recession.

The U.S. Federal Reserve will continue to act "as appropriate" to sustain the economic expansion in the world's biggest economy, Fed Chair Jerome Powell said Friday in Zurich, confirming expectations for a rate cut at the Fed's next policy decision on Sept. 18.

Sterling traded at 1.2254, down 0.2% for the day.

The U.S. dollar index against a basket of six major currencies was little changed at 98.40.

The dollar traded at 106.97 yen, little changed from Friday.

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