What specific trigger, in your view, can make the SNB give up?
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Global Macro Trading Journal
- Thread starter Daal
- Start date
Quote from ralph00:
I assume everybody has read Randy McKay's interview in Market Wizards II about how he made millions in the 70s betting the British would give up on $1.70 as a ceiling on GBPUSD. All his trader buddies were shorting the hell out of GBP at $1.70 because it was a "risk free" trade. He just kept accumulating GBP knowing eventually the BoE would give up. One morning he woke up and GBP was trading at $1.7050 and he knew he had won. A month or two later, it was at $1.90.
I agree it's probably too early to bet on the SNB giving up, but when necessary, give up they will.
I don't think I even understand your example, if he bought GBP, 1.90 is supposed to be bad for him
So far my biggest mistake this year has been not having followed through with buying german bunds. I had more confidence in that than shorting EUR but I didn't pull the trigger. The american ETF was quite illiquid and I pretty much never trade european markerts(only through US proxies) so my fear of the unknown cost me quite a bit
If your broker supports EUREX/DTB then you can simply trade the German fixed income futures. They're highly liquid across the maturity spectrum.
Also - as opposed to ETFs - no pesky withholding taxes on dividends to deal with.
Also - as opposed to ETFs - no pesky withholding taxes on dividends to deal with.
Quote from Butterball:
If your broker supports EUREX/DTB then you can simply trade the German fixed income futures. They're highly liquid across the maturity spectrum.
Also - as opposed to ETFs - no pesky withholding taxes on dividends to deal with.
I believe IB has it but futures have a fixed size which makes it pretty hard to properly size your position. I don't want to chase now too. Maybe if there is a correction
I have to say I find it highly amusing to see people on ET skeptical the SNB can hold the peg. Those are the same people who claim central banks are insane with their money printing efforts that don't end
They essentially are betting the CBs will turn hawkish, which goes completly against their own views. Of course, they don't realize that. The truth is that they are skeptical because they are free market purists and it breaks their heart to see a goverment fixing a market price, so their instinct is to say it won't work because the market is stronger. If they like the gold standard then it just adds another layer to their contradiction because the gold standard is quite similar to a fixed currency. I don't see them claiming gold pegs are unsustainable
They essentially are betting the CBs will turn hawkish, which goes completly against their own views. Of course, they don't realize that. The truth is that they are skeptical because they are free market purists and it breaks their heart to see a goverment fixing a market price, so their instinct is to say it won't work because the market is stronger. If they like the gold standard then it just adds another layer to their contradiction because the gold standard is quite similar to a fixed currency. I don't see them claiming gold pegs are unsustainable
Quote from Daal:
I don't think I even understand your example, if he bought GBP, 1.90 is supposed to be bad for him
No, the U.K. set a ceiling on GBPUSD of $1.70. The conventional wisdom was to then sell GBP at $1.70 since it could only go down from that level. McKay instead bought at $1.70 and continued to buy. Finally, the U.K gave in on the ceiling and let sterling go. It rose to $1.90 over the next weeks, making McKay a fortune.
Quote from ralph00:
No, the U.K. set a ceiling on GBPUSD of $1.70. The conventional wisdom was to then sell GBP at $1.70 since it could only go down from that level. McKay instead bought at $1.70 and continued to buy. Finally, the U.K gave in on the ceiling and let sterling go. It rose to $1.90 over the next weeks, making McKay a fortune.
You are talking about the GBPUSD but quoting as USDGBP
Quote from Daal:
I have to say I find it highly amusing to see people on ET skeptical the SNB can hold the peg. Those are the same people who claim central banks are insane with their money printing efforts that don't end
They essentially are betting the CBs will turn hawkish, which goes completly against their own views. Of course, they don't realize that. The truth is that they are skeptical because they are free market purists and it breaks their heart to see a goverment fixing a market price, so their instinct is to say it won't work because the market is stronger. If they like the gold standard then it just adds another layer to their contradiction because the gold standard is quite similar to a fixed currency. I don't see them claiming gold pegs are unsustainable
Who is betting? Not me. Simply discussing. The SNB action will unleash unintended consequences that they nor I have no idea about. If history is any guide, they won't be good ones. For now, I have no doubt that the CHF 1.20 floor will hold.
How the hell did gold make it into this discussion.