Summer Trading And Libra

Summer Trading And Libra

Swissquote Ltd  | Jul 17, 2019 10:07

The summer doldrums are here. Volatility in FX markets has all but dried up, only GBP providing fireworks as UK and EU leaders quarrelled. Declining interest rate expectations and rising stock of negative-yielding bond have marginally exciting the FX carry trade.

Traders are taking asymmetrical risk by going long TRY in our view. While equities are bobbing up-and-down with every rumor, news flash, and Trump tweet. S&P 500 weakened marginally as falling oil prices (due to easing tensions between US / Iran) weighed on energy stocks and Dallas Fed Kaplan suggested US rate cuts were “tactical adjustment” verse full easing cycle.

The compressed US front-end rates jumped on the statements. Transportation stocks reported higher than expected 2Q earnings continuing a solid trend of earning reports.

Only the public thrashing of Facebook’s crypto play Libra before the Senate Banking Committee kept us from running to the beach. Granted, this committee was significantly more prepared to handle the concept of potential global cryptocurrency, then when Facebook (NASDAQ:FB) CEO Market Zuckerberg ran over congressional lawmakers last year. The overall impression was that US lawmakers were no happy. One factor that did not sit well (among a long, long list) with members that Libra Association would be regulated by the Swiss government specifically Swiss Financial Markets Supervisory Authority (FINMA).

Head of Facebooks blockchain subsidiary Calibra David Marcus clearly stated that Libra Association intends to comply will all U.S. tax, anti-money laundering, and anti-fraud laws. However, with primary jurisdiction in Switzerland it hard to imagine anything more than a light touch approach by Libra. We have doubts that Libra will be anything more than another digital payment system rather than a disrupting payment token (lack of decentralization is a HUGE issue for us).

The reality is Facebook with root still very much in the “real world” and enjoying the blanket protection of the US government is unlikely to push the project much further if the US puts the kibosh on it. The negativity was felt in the crypto space as Bitcoin hand another down day falling to $9238 overnight (50d MA). We would argue that Libra's exposure should be positive for bitcoin as it highlights the complexity in developing widely accepted alternatives. Marcus will be defending Libra in front

Disclaimer: While every effort has been made to ensure that the data quoted and used for the research behind this document is reliable, there is no guarantee that it is correct, and Swissquote Bank and its subsidiaries can accept no liability whatsoever in respect of any errors or omissions, or regarding the accuracy, completeness or reliability of the information contained herein. This document does not constitute a recommendation o sell and/or buy any financial products and is not to be considered as a solicitation and/or an offer to enter into any transaction. This document is a piece of economic research and is not intended to constitute investment advice, nor to solicit dealing in securities or in any other kind of investment.

Although every investment involves some degree of risk, the risk of loss trading off-exchange forex contracts can be substantial. Therefore if you are considering trading in this market, you should be aware of the risks associated with this product so you can make informed decisions prior to investing. The material presented here in not to be construed as trading advice or strategy. Swissquote Bank makes a strong effort to use reliable, expansive information, but we make no representation that it is accurate or complete. In addition, we have no obligation to notify you when opinions or data in this material change. Any prices stated in this report are for information purposes only and do not represent valuations for individual securities or other instruments.

Swissquote Ltd

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