16.10 - what is more stable than Swiss franc?

Other asset outperformed Swiss franc.

Other asset outperformed Swiss franc.

What does the world think of the trading future?

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Trading has not been easy in the past couple of months. And there are little signs that point to the change of the situation in the nearest future. With the world’s efforts to somehow decrease tensions in world and stock markets there are simply too many obstacles for the improvement right now.

One of the biggest bumps on our road on easy and safe trading is Trump’s rhetoric on world trading and international relations between the United States and other countries. With China already targeted and failing to go out of United States’ radar, it is still possible for the European Union to preserve healthy relations with the United Sates. But this is not going to be easy. With EU wanting to push the greenback out of the spotlight with euro, it is easy for Trump to find a reason for new tariffs towards EU this time. And full blown trade war is going to be on the way then.

Right now there are trade talks ongoing between the two counters, but apparently there is not too much faith in Trump’s plans for the Union. After all we have been watching him and China for months and it is fairly easy for us to draw conclusions out of the situation. remember when he pulled out of the agreement after it was already set in motion? Didn’t even bet an eye. What makes us think that with European Union the situation is going to be different?

But when in tensions between the United States and China the first ones were the clear winners, we doubt that in the war between US and EU the outcome is going to be the same. After all, Union consists of several countries and some of them have strong economies as well as their own pressure mechanisms for the United States. We have seen the way Merkel negotiated with Trump and we are sure that she would be more than happy to demonstrate economic strength and independence of the Union.

In the meantime, there are talks that the United States are going to slap 25 percent automobile tariff on the EU. And it is clear that there will be no wiggle time for the Union to think about countermeasures. In fact, they are talked about with such certainty that we are sure – all of them are already prepared and all ready to shoot in case of tariff attack.

Although there is a hidden hazard for euro. It is for sure going to be weakened by any possible trade tensions and with Brexit talks getting a lot of attention lately we are not sure that the united European currency is strong enough to withstand the pressure. EUR and USD trading were pretty stable which brought us real joy, but in the end it was always going to come down to sides’ readiness to join into trade talks. That is what our stable trading future with USD and EUR is depending on now.

Will yen surpass franc? It is already.

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Last week in our search for safe haven we ventured into the world of Swiss franc. Easy to trade with, reliable and stable because of Switzerland’s neutral status and not-involvement in any of the international drama. But it seems that there is even better case scenario for those, who is seeking risk-free trading. And it lies very much to the east – Japan.

We talked about yen being stronger and more trustworthy than Swiss franc, but with yen performing so unstable last week we just had to turn out eyes to the European counterpart. But today, with amazing recovery done by Japanese currency over the weekend we have to ask ourselves – is it time to talk about yen’s supremacy over all seemingly stable currencies in the world?

What changed our perception of the safest currency? Massive international selloff that took place last week. Performance of the two currencies in the crisis situation can be compared now and we have to say – yen won this round. Last week exposed all of the strongest sides for the Japanese currency. Even though greenback’s performance was pretty good and its benchmark hit two high point two days in a row, yen gained 1.3 percent against it, recovering a lot of points in the equity markets. In its turn franc’s gains were only 0.5 percent, even though yen is under far more pressure than Swiss currency.

What were the reasons for such behavior? Well, for once Europe can hardly be named a still economic region right now. Political situation is weird as well. All that it tells us is the fact that when the turmoil’s center shifts to Europe, no matter how stable the performance of the asset is – its geographical position is what really counts. And Japan, although under some pressure from the United States, has no other problems in economic and political region.

Policies of the central banks of the two countries may also be an important part of the whole discussion. Not even as much policies of the central banks, as the pace at which they have to meddle into the currency markets in case there is a selloff or a crisis situation. Japanese bank always gets inside the problem later, which indicates the strength of the currency and the support it gets from the inside of the country.

Of course, we are not trying to undermine international outlook on franc. We are only trying to say that once again yen might come to the rescue of international currency trading. After all, there has never been a time that franc looked more preferable than yen for a long time.

 

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