‘We Are in a Currency War, But Nobody Has Admitted It,’ Strategist Says
‘We Are in a Currency War, But Nobody Has Admitted It,’ Strategist Says – CNBC
Central banks are currently embroiled in a covert currency war which is causing stagnation in foreign exchange markets, according to Thanos Vamvakidis, the global head of G-10 FX strategy at Bank of America Merrill Lynch.
- Currency Intervention: How Would the US Do It, and Would It Work? – Financial Times
- Wall Street Firms See Increased Chance That Trump Takes Action to Weaken the Dollar – CNBC
Britain is Bracing for an Economic Shock as No-Deal Brexit Draws Closer – Daily Telegraph
Get ready for a humdinger of an economic shock. That in any case is what policymakers at the Bank of England and the Treasury are doing.
As Fed Nears Rate Cut, Policymakers Debate How Deep, and Even If – Reuters
With the first U.S. interest rate reduction in a decade expected later this month, two Federal Reserve policymakers sketched out arguments on how deep the cut should be, even as a third said she needs more data before being ready to sign on at all.
- Powell Maintains Fed Pledge to Act to Sustain US Expansion – Bloomberg
- Betting Man Kyle Bass Wagers Fed Policy Will Turn Japanese – Financial Times
Germany’s Von der Leyen Secures Powerful EU Executive Top Job – Reuters
Germany’s Ursula von der Leyen secured European parliamentary approval on Tuesday to become the first female European Commission president on a platform of a greener, fairer and rule-based Europe.
China’s holdings of US Treasuries including notes, bills and bonds fell by US$2.8 billion in May to US$1.11 trillion. The dip in May was the third consecutive month of declines, leaving China’s holdings at the smallest since May 2017.
US, Japan Eye Possible Small Trade Deal by September – Reuters
The United States and Japan are working on a trade deal involving agriculture and autos that could be agreed by President Donald Trump and Prime Minister Shinzo Abe when they meet in New York in September, three industry sources familiar with the discussions said.
Regulatory News
Reinvent International Monetary Order or Face Chinese Dominance: France – Reuters
France’s finance minister said the post-war international monetary order needed to be reinvented or become increasingly dominated by China.
Australia Bank Watchdog Faces Funding Challenge as it Gets New Powers – Reuters
Australia’s banking watchdog vowed to be tougher with the entities it oversees but needs more funds to carry out its work, its chairman said, after a government report recommended the regulator be more forceful and less discreet.
Lagarde Resigns as IMF Chief, Starting Race for Her Successor – Reuters
International Monetary Fund chief Christine Lagarde submitted her resignation from the global crisis lender on Tuesday, citing more clarity about her nomination to lead the European Central Bank as European legislators approved a new top bureaucrat.
HSBC Lifts Ban on Personal Mobile Phones for Traders – Financial News
Regulators have been pushing banks to ensure they have appropriate controls in place around the use of personal devices.
Participants Should “Avoid” Eonia – ECB Working Group – FOW
The euro risk-free-rates working group said participants should “avoid entering into new contracts referencing Eonia”.
Crypto News
Bitcoin Tumbles as US Senators Grill Facebook on Crypto Plans – Reuters
The cryptocurrency market took a beating on Tuesday with bitcoin losing over 10% in value after US lawmakers grilled Facebook on its cryptocurrency plans, as political and regulatory scrutiny of digital coins intensifies.
- Key Takeaways from Day One of the Libra Hearings – Profit & Loss
- Why Facebook’s Libra Cryptocurrency has Banks and Regulators Scrambling to Respond– South China Morning Post
Donald Trump’s Bitcoin Takedown Signals Global Currency War – Yahoo Finance
US President Donald Trump’s tweet attacking bitcoin highlights his increasing interest in controlling global currency markets — an interest that could create a “new world order” in foreign exchange.
G-7 Finance Chiefs to Tackle Cryptocurrency Risks, Digital Tax at Paris Summit – Marketwatch
Finance officials from the Group of Seven rich democracies will weigh risks from new digital currencies and debate how to tax tech companies like Google and Amazon when they meet at a chateau north of Paris.
Tether’s $5 Billion Error Exposes Crypto Market’s Fragility – Wall Street Journal
Investors got a reminder that the market infrastructure for trading cryptocurrency is still under construction.
Are Hedge Funds Placing a Big Short in Booming Bitcoin? – Financial News
Hedge funds and other big traders are betting that bitcoin will fall, even as the digital currency has risen above $10,000 on a new wave of crypto-optimism.
Company News
CTAs Bounce Back in June – Profit & Loss
Commodity Trading Advisors posted a 1.59% return in June, according to the Barclay CTA Index compiled by BarclayHedge.
Ongoing market volatility stemming from Brexit, trade wars, and other supply chain disruptions resulted in $23.39 billion in foreign exchange losses for publicly traded North American companies during the first quarter of 2019, according to the new Kyriba Currency Impact Report.
Global Macro Hedge Funds Struggle to Regain Top Form – Financial News
Global macro, the hedge-fund style that made George Soros and Alan Howard famous, is struggling to recover from a dire 2018 — with one investor lamenting that top funds are “just not there any more”.
The Lawyer Thrust into the Front Line of Deutsche Clean-Up – Financial Times
Stefan Simon advised the bank on Libor scandal — now he is its head of regulation.
Tech Giants Draw Fire in Congress – Wall Street Journal
Concerns about the power of the major technology companies echoed across the nation’s capital on Tuesday, with politicians in both parties demanding more regulatory scrutiny of the tech giants’ reach and plans for expansion.
Market Savvy
Time for ECB to Admit its Existing Policy Arsenal is Exhausted – Financial Times
Who does the European Central Bank work for? It sounds like an absurd question, but the market finds itself in an absurd situation. The soft patch in Europe has investors clamouring for the ECB to act — yet not one of those same investors believes interest rate cuts or quantitative easing will have a beneficial impact.
Thai Central Bank Says Cutting Policy Rate May Not Have Much Impact – Reuters
Thailand’s real interest rates are low compared with those of its regional peers, so cutting the benchmark rate may not have much impact, the central bank said.
Does Investing in Emerging Markets Still Make Sense? – Financial Times
Two controversial departures of high-ranking technocrats in the space of three days, one in Ankara, the other in Mexico City, have served as reminders of the high-risk nature of investing in emerging markets.
Cold Currency War Between Major Trading Blocs Flaring Up Again: Pimco
Cold Currency War Between Major Trading Blocs Flaring Up Again: Pimco – Business Standard
A full-blown currency war where major central banks and governments, including the US, deliberately weaken their currencies can no longer be ruled out, Pacific Investment Management Co.’s global economic adviser Joachim Fels wrote in a report.
China Q2 GDP Growth Slows to 27-Year Low
China Q2 GDP Growth Slows to 27-Year Low – Reuters
China’s economic growth slowed to 6.2% in the second quarter, its weakest pace in at least 27 years, as demand at home and abroad faltered in the face of mounting US trade pressure.
CFTC Agrees to Rein in Rules for Overseas Clearing Houses
Top Headlines
CFTC Agrees to Rein in Rules for Overseas Clearing Houses – Financial Times (subscription)
The main US derivatives markets regulator has agreed to rein in its rules for regulating overseas clearing houses, in a move Washington hopes will ease a stand-off with counterparts in Europe. A proposal was passed unanimously at a meeting of the Commodity Futures Trading Commission in Washington late on Thursday. By a narrow vote, the five commissioners also agreed to let overseas clearing houses that are exempt from US standards accept business from US citizens.
Read MoreGFXC Updates on Working Group Progress
Top Headlines
GFXC Updates on Working Group Progress – Profit & Loss
The Global Foreign Exchange Committee (GFXC) has released a new illustrative example on “cover and deal” trading activity to be included in the FX Global Code in a future update, which highlights so-called “under-filling” of client orders using the last look window. The negative example highlights that a participant accepting an order on the understanding that it is operating in “cover and deal” mode and therefore not assuming any market risk, cannot execute the full amount with its own liquidity provider and then under-fill the client because the market has moved.
Read MoretrueEX to Shut Swaps Trading Platform
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trueEX to Shut Swaps Trading Platform – Risk.net (subscription)
Interest rate swaps trading platform trueEX will close in less than a fortnight, reinventing itself as a cryptocurrency derivatives exchange. The platform’s exit leaves the swaps market in the hands of incumbents: broker-run platforms continue to dominate interdealer trading of interest rate swaps, while dealer-to-client trading will take place on Bloomberg and Tradeweb.
Read MorePrimary Venues See Volume Increase from May
Top Headlines
Primary Venues See Volume Increase from May – Profit & Loss
Three primary FX trading venues saw increased month-on-month activity in June 2019, but as was the case with other platforms that reported earlier this month, they were all down year-on-year with the exception of Refinitiv’s non-spot FX products.
Read MoreDeutsche Bank to Quit Equities Trading and Cut 18,000 Jobs in Major Overhaul
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Deutsche Bank will exit global equities trading, cut 18,000 jobs and transfer €75bn of risk-weighted assets into a so-called bad bank as part of a major overhaul of the German lender’s business. The bank has also entered into preliminary talks over the sale of its electronic trading and prime finance divisions with French rival BNP Paribas.
- Deutsche Bank Outlines Significant Strategic Transformation and Restructuring Plans – Deutsche Bank
- Deutsche Bank Shares Rise after Shake-Up to Cut 18,000 Jobs – Reuters
- After Deutsche Bank Cuts, Where Will the Growth Be? – Reuters
- Inside Deutsche Bank’s Cuts: Christian Sewing’s Private Letter to Staff – eFinancialCareers
Banks and Prop Shops Expect More Trading Tie-Ups
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Banks and Prop Shops Expect More Trading Tie-Ups – FX Week (subscription)
Bank and non-bank dealers expect electronic trading to continue spreading – bringing the two groups of firms into more frequent competition, but also creating chances for them to work together.
Read MoreSwitzerland-EU Row Shows Equivalence Will Not Work for UK
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Switzerland-EU Row Shows Equivalence Will Not Work for UK – GlobalCapital
The EU’s decision not to extend equivalence to Swiss exchanges and Switzerland’s subsequent retaliation is a perfect example of why the measure is an insufficient framework for future EU-UK financial services relations after Brexit.
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