Top Headlines

FX Traders Pivot to Tactical Bets as Old-School Strategies Flop – Bloomberg

Currency traders are switching up their playbooks as some of the most time-tested strategies are fizzling in the $5.1-trillion-a-day market. Momentum, carry and value bets have delivered lacklustre returns in foreign exchange this year, prompting some money managers to shelve them in favour of event-driven and niche positions.

A Different Kind of Alpha – Profit & Loss

Even when implementing passive currency hedging strategies, it’s still important to think in terms of alpha, says Jay Moore, a senior vice president at Brown Brothers Harriman, during a panel discussion at the Profit & Loss Forex Network New York conference.

Sterling Skids to $1.30 as Inflation, Brexit Cast August Rate Rise Doubt – Reuters

Sterling slid to 10-month lows against the dollar on Wednesday after data showed British inflation failed to rise as expected, a day after Brexit-linked political turmoil had sent the currency hurtling lower.

Dollar Extends Advance After Powell; Stocks Climb – Bloomberg

The dollar advanced for a second day after Federal Reserve Chairman Jerome Powell gave an upbeat assessment of the US economy, helping spur declines in raw materials and emerging-market currencies.

Euro, Yen Slide as Powell’s Optimism Fuels Dollar Rally – Reuters

The euro fell and the yen slid to a six-month low on Wednesday as the dollar extended its rally following bullish comments from US Federal Reserve Chairman Jerome Powell about the strength of the US economy.

New York FX Traders Are More Bullish the Dollar Than Londoners – Bloomberg

Bank of America analysis shows the dollar outperforms in US hours – a bullish signal for the currency – while the pound rallies during UK hours and the euro slumps disproportionately. The yen slides markedly during Asia trading.

Regulatory News

Bank of England Launches Sonia Transition Consultation – Profit & Loss

The Bank of England’s Working Group on Sterling Risk Free Reference Rates, which is tasked with leading the transition away from Libor to term Sonia (sterling overnight index average) rates, has launched a consultation process to help drive the evolution, which is intended to be complete by the end of 2021.

ECB Warns of “Systemic” Threat if Euribor Reform Efforts Fail – Reuters

The European Central Bank is concerned about the risk of systemic problems if efforts to reform Euribor, one of the bank-to-bank lending benchmarks caught up in a global rate-rigging scandal, get torpedoed.

Crypto News

FSB: Cryptoassets Not a Risk to Financial Stability – Profit & Loss

In a new report to the G20, the Financial Stability Board (FSB) has concluded that “cryptoassets do not pose a material risk to global financial stability at this time”.

While this is a welcome boost for the crypto industry, the FSB does make clear that these assets should be vigilantly monitored by authorities going forward.

New Crypto Exchange Says Trust is the Name of the Game – The Trade Crypto

Recently appointed advisor and London Stock Exchange veteran David Lester, chief executive Graham Rodford and chief financial officer Matthew Pollard at institutional crypto exchange Archax discuss the upcoming launch of their exchange, and their thoughts on the future of institutional crypto trading. 

Instant Gains from Cryptocurrency? Not If You’re a Big Name – Financial News (subscription)

Despite all the uncertainty and scepticism surrounding the trading of cryptocurrencies, recent moves suggest many of banking’s biggest names are in no way deterred from cashing in on the crypto craze.

Cryptocurrency Exchanges Are Getting Hacked Because It’s Easy – Wall Street Journal (subscription)

Since 2011, there have been 56 cyberattacks directed at cryptocurrency exchanges and other digital currency platforms around the world, bringing the total of hacking-related losses to $1.63 billion. The most recent hack took place on July 9, when hackers swiped $23.5 million worth of cryptocurrencies from Israeli platform, Bancor.

Company News

DTCC to Open Dublin Office to Protect Against Brexit – Irish Times

The Depository Trust and Clearing Corporation (DTCC), which holds data for around four-fifths of the global derivatives market, is hedging its bets ahead of Brexit by establishing an office in Ireland in advance of the March 2019 UK departure date.

Credit Suisse, Goldman Sachs and JP Morgan Clear First SOFR Swaps with LCH – The Trade

The London Stock Exchange Group’s central counterparty LCH has cleared its first interest rate swaps referencing the newly introduced US alternative to the Libor benchmark. Credit Suisse, Goldman Sachs and JP Morgan were among the first participants to clear the Secured Overnight Financing Rate (SOFR) swaps with LCH.

Trading Technologies Teams Up with Crypto Exchanges to Stamp Out Manipulation – Business Insider

Trading Technologies has partnered with a group of cryptocurrency exchanges to stamp out manipulation on their platforms.  Coinfloor, a UK crypto exchange operator, will be using the firm’s so-called Score technology to monitor its markets for manipulation and other unusual activity.

IBM is Experimenting with a Cryptocurrency That’s Pegged to the US Dollar – CNBC

IBM has teamed up with financial technology start-up Stronghold on a cryptocurrency that’s pegged to the US dollar. The tech giant has put its weight behind a so-called “stablecoin”, a digital token that, in principle, is tied to an existing government-backed currency, in order to reduce the volatility associated with virtual currencies. 

Market Savvy

Investors Show Faith in Haven Currencies as Trade Tensions Mount – Bloomberg

Over the longer term, investors would rather be safe than sorry. Traders favour buying call options over puts on the yen and the Swiss franc, both haven currencies, as global trade tensions escalate and political risk becomes hard to price. Those are the only two currencies among the Group-of-10 where investors prefer calls against the dollar.

Swiss Franc, Scandinavian Currencies Most Exposed to Trade War – Bloomberg

The Swiss franc and Scandinavian currencies are among the most vulnerable to the escalating trade war between the US and China. The franc, Danish krone and Swedish krona are likely to be the worst-affected given that they represent small and open economies even though the nations’ direct trade exposure to China is relatively low. 

Emerging Markets Feel Dollar Pinch, Turkey’s Lira Shines – Reuters

A perky dollar hurt emerging market assets on Wednesday with stocks edging lower and many currencies weakening, but Turkey’s lira rallied to a one-week high on expectations of another interest rate hike next week.