Markets Steady as ECB Countdown Begins

The retail forex world remains upside down after the SNB ended the 1.20 EUR/CHF floor but weekend news didn't jar the market. Early week moves gave the yen a slight boost while the Swiss franc is modestly lower after an 18% gain last week. The CFTC data showed more traders piling into euro shorts. 8 Premium trades are currently in progress. Full susbscriber access is found here.

As the market finds a footing the focus will shift to the ECB. Most skeptics about sovereign QE this month have relented and it's near unanimous that an announcement is coming so the emphasis is now on the details.

Comments from the ECB's Knot on Friday cemented expectations as he hinted it was pretty much a done deal. He said Draghi presented a plan to Merkel where national central banks buy their own debt with a limit of 20-25% of outstanding bonds. The big question that arises is, what if the Bundesbank says it doesn't want to buy? If so, that would cripple any QE program before it gets underway but would give the euro a short-term lift.

Other news that was overshadowed was some mild easing in China as the central bank announced the equivalent of $8.1B in discounted loans in a money-for-lending type scheme. The dollar figures aren't large but it emphasizes that the PBOC is in a dovish phase.

Early in the week, the Asia-Pacific calendar is light but the Japanese consumer is a highlight. Consumer confidence is due at 0500 GMT and expected at 38.8. Thirty minutes later department store sales data due. Neither is likely to drive markets but the BOJ could begin to sound less aggressive if consumer spending picks up.

Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +. EUR -168K vs -161K prior JPY -94K vs -90K prior GBP -37K vs -26K prior AUD -45K vs -48K prior CAD -21K vs -17K prior CHF -26K vs -24K prior NZD -2K vs -1K prior

Heading into the SNB bombshell, Swiss franc net shorts were the highest since June 2013. It's another example of the massive transfer and destruction of wealth after the surprise move.