A new survey from the Bank for International Settlements (BIS) shows that some central banks are creeping towards issuing their own digital currencies. A total of 66 central banks responded to the latest survey, which was conducted last year, representing 21 advanced economies and 45 emerging market economies, covering 75% of the world’s population and […]
Tag: central banks
The Bank for International Settlements (BIS) has announced plans to establish an innovation hub to “foster international collaboration on innovative financial technology within the central banking community complementing the already well established cooperation within the existing committees”. The role of the BIS Innovation Hub will be, the bank says, to identify and develop in-depth insights […]
A new research report from JP Morgan Chase Institute highlights the impact of central bank communication choices on financial market volatility.In the report, Does the Timing of Central Bank Announcements Matter?, the authors analysed data around the Swiss National Bank’s (SNB) decision to remove the EUR/CHF floor in January 2015, and found evidence that the timing of the decision increased subsequent market volatility.This latest research builds on a previous paper released by JP Morgan in June 2018, in which it found evidence that many hedge funds had predicated trading strategies on the belief that the SNB would maintain the EUR/CHF floor at 1.20.
The January 3 flash event in FX markets continues to fuel the news cycle and in this week’s podcast, Colin Lambert and Galen Stops discuss the real impact of algos – widely cited as a major factor in the event – in markets. For once they agree on a central theme in the debate, including Lambert (very reluctantly) shooting down one of his own arguments with Stops last year on trend following, but as always there’s room for divergent views.
A new survey from the Official Monetary and Financial Institutions Forum (OMFIF) and IBM finds increasing support for central bank issued digital currencies (CBDC).
OMFIF describes itself as “an independent think tank for central banking, economic policy and public investment” and says the new report describes potential use cases for central banks to support central bank digital currencies.
A CBDC is a digital form of fiat money, which is a currency established as money by government regulation. It differs from digital currencies, which are not issued by the state and lack the regulations of a government.
The Bank for International Settlements’ Markets Committee has released a report by a recently-formed study group, which looks at the evolution of what it terms fast-paced electronic markets, focusing mainly on spot FX, and the challenges this evolution has for central banks.
The report says the market structure changes have implications for central banks’ approaches to market monitoring, including the range of participants with which they engage, the types of data they collect, and the tools and technologies they utilise.
There was, naturally, quite a lot of attention on the return of EUR/CHF to 1.20 on Friday, most of if, naturally again, frivolous. On a return basis, anyone who didn’t care about mark-to-market would have been back in the black in the mid-1.19s thanks to carry, but that didn’t stop people like me joining in the frivolity, tweeting the market may have an issue working through the 1.20005 offer for 20 yards. It shows though, how much the event is embedded in the market’s psyche that we are commenting about it.
I am very grateful for the responses to Thursday’s column, ranging from congratulations, through jokes, to guesses as to exactly what event triggered the Cable drop I was talking of. On the latter the favourite was the infamous (and possibly apocryphal) story of the “Carrier Down” message, but I think it was later than that.
Either way, to complete my self –indulgent look at my top 10 events from my 40 years in foreign exchange, here are the top five.
The starting point for this column has to be the observation that, by and large, foreign exchange dealers do like a moan. Let’s face it, we’re a bunch of whingers and the events of the past week – thanks to flip-flopping central bankers – have only reinforced this trait. Are we, however, looking at things the wrong way? Markets undoubtedly adjust quicker to events than they used to, but is there an opportunity for traders in this? I happen to think there is.
Following his retirement from Citi, where he spent nearly 30 years and most recently served as global head of G10 FX, James Bindler, reflected at Forex Network London about the changes that he’s observed in the industry.
He’s also made a number of predictions regarding its future.
1. The line between banks and non-banks will continue to blur
“As always with all these things, it comes from both sides of the equation. Banks will get faster and high-frequency traders will seek capital to backstop their risk taking activities,” said Bindler.
Discussing the challenges facing market makers, Bindler noted that the cost of FX trading is generally rising, particularly for firms that need to use prime brokers to access the market.