{"id":67352,"date":"2015-02-01T20:36:13","date_gmt":"2015-02-02T01:36:13","guid":{"rendered":"http:\/\/countingpips.com\/?p=67352"},"modified":"2015-02-01T20:36:13","modified_gmt":"2015-02-02T01:36:13","slug":"forex-interview-ifc-markets-analyst-sergey-kamenshikov-on-swiss-franc-crisis","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2015\/02\/forex-interview-ifc-markets-analyst-sergey-kamenshikov-on-swiss-franc-crisis\/","title":{"rendered":"Forex Interview: IFC Markets Analyst Sergey Kamenshikov on Swiss Franc Crisis"},"content":{"rendered":"
February 1, 2015<\/div>
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By Zachary Storella, CountingPips.com<\/strong><\/p>\n

Today, I am very pleased to bring you our latest forex interview with Sergey Kamenshikov from IFC Markets. Sergey is currently the Chief Financial Analyst of IFC Markets, a forex brokerage licensed by the British Virgin Islands Financial Services Commission (BVI FSC). In this interview, Sergey shares his views on the recent forex market turmoil surrounding the Swiss National Bank’s move to “de-peg” its currency from the 1.2000 level against the euro.<\/p>\n

Q: For those readers who may have not been paying close attention, \u0441an you briefly explain what just unfolded in the Swiss franc crisis as you see it and how it came to be?<\/b><\/p>\n

A:<\/strong> On January 15 the Swiss National Bank unexpectedly refused to support a minimum EUR\/CHF<\/b> exchange rate<\/a> of 1.20. For three years the regulator prevented strengthening of the national currency against euro, protecting the Swiss economy from deflation and supporting Swiss exporters. Meanwhile\u00a0the \"\"macroeconomic balance between Switzerland and EU became more unstable. It happened amid the crisis of southern EU countries – Greece, Spain and Portugal, as well as strict Swiss immigration policy. As an example, we may consider 3.4% of unemployment versus 11.5% in the EU or 1.9% GDP growth versus 0.8% (EU) – third quarter of 2014 is analyzed. A distortion of macroeconomic balance co-existed with a high correlation between EUR(USD) and CHF(USD): 97% per month on the daily chart. This technical tie-up has created a dangerous illusion for investors who rely on technical or mathematical analysis. Finally, against the background of ECB emission the Swiss National Bank removed the euro support. At first glance, this event can not be called irrational: financial institutions had to expect this scenario and to hedge their risks. On the other hand, there was no certainty that it could happen without warning a week before the ECB meeting. Finally market inefficiency has been restored as usual: the correlation dropped to 41%, which corresponded to a fundamental trend: the gap between the two economies in Europe is growing.<\/p>\n

Q: On a local economy level, what do you think the Swiss National Bank decision will ultimately do to the Swiss economy?<\/b><\/b><\/p>\n

A:<\/strong> It is clear that euro relative weakening hits the internal Swiss market and increases a competition with other EU producers. As a result, increased supply slowdowns and inflation rate and bring benefits to consumers. At the same time, the national economy has to work under higher pressure, especially exporting sectors. This property may result in investment flows decrease.<\/p>

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Q: How about specifically the Swiss franc’s strength? The franc was seeing consistent declines against the dollar in recent months (up to parity), do you think this could resume or is franc strength likely to persist? <\/b><\/b><\/p>\n

A:<\/strong> Although the Swiss National Bank has caused a sufficient strengthening of franc, a total tendency is preserved. The correlation between CHF and EUR at monthly chart is still above 90%. So we may analyze the Euro zone tendency as a whole. American currency reflects a success of US economic policy and QE completion. US markets show the highest recovery rates: 3.4% vs. the global rate of 2.7%. At the same time austerity policies, introduced in several countries of the EU, have resulted in a higher unemployment rate of 11%, which decelerates a EU recovery. Additionally ECB emission is going to weaken sufficiently the European currency. So while Switzerland is a closest trading partner of EU, a probability of USD\/CHF downward trend is extremely low in long-term (1 year).<\/p>\n

A weekly chart of PCI European index, composed by IFCM, defines a fundamental strength of EUR in relation to total FX market. We can see that amid optimistic US statistical data a belief of investors in the European currency is vanishing. The bearish breakdown of a corridor is primarily caused by ECB emission plans.<\/p>\n

\"eurochf\"<\/a><\/p>\n

Q: What ripple effects do you feel the Swiss National Bank decision will have for the broader international markets?<\/b><\/b><\/p>\n

A:<\/strong> Euro support was convenient for arbitrage trading<\/a> strategies and short term traders. For now a value of risk increased sufficiently because a reliability of stop loss orders for EUR\/CHF purchase fell. It means that a lack of CHF liquidity will exist in short term. However, fortunately a fundamental advantages of Swiss economy are obvious and therefore liquidity will be recovered finally and investment attraction will be preserved. Markets complexity finally leads to a new fundamental equilibrium.<\/p>\n

Q: In the Forex industry as a whole, we have seen quite amazing circumstances take place with many Forex brokers suffering losses and some brokers going out of business. How do you see the aftermath of the Swiss franc crisis playing out for the Forex industry?<\/b><\/b><\/p>\n

A:<\/strong> I suppose that FX companies may become more careful and review risk management principles: leverage limits, marginal requirements, etc. Maybe more attention will be provided to market analysis and its inefficiencies. For sure a competition decrease will cause a natural growth of commissions \u2013 so the traders will feel an FX market<\/a> restructuring. Unfortunately some brokers will leave regulation zones to receive more recovering possibilities and avoid publicity. This will finally make them change customer audience, because most professional traders trust licensed companies (according to my personal trading experience and an experience of my colleagues).<\/p>\n

Q: Do you think at the end of the day, this can have a positive outcome for the Forex industry?<\/b><\/b><\/p>\n

A:<\/strong> I suppose that FX services will become more expensive and reliable at the same time. This tendency will bring benefits to beginners, limiting their risks artificially. At the same time, experienced traders will face higher commissions. Eventually it leads to decline of their revenues and necessity of trading system review.<\/p>\n

Q: Can you talk about how IFC weathered the storm?<\/b><\/b><\/p>\n

A:<\/strong> Capitalization of our company, which is monitored by CySEC and BVI regulators, has covered all the losses, brought by risky clients. Profits were paid in time although our trading conditions have not been changed this day. For now IFC totally recovered its capitalization.<\/p>\n

Q:<\/b> For individual Forex traders, what lessons do you think should be learned from this situation?<\/b><\/b><\/p>\n

A:<\/strong> Even in liquidity crisis stage a trader may cut the risks, while following simple recommendations:<\/p>\n

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  1. Follow strict risk management rules. In this case, even gaps which are formed in the opposite direction, will not cause substantial damage to your deposit;<\/li>\n
  2. Work with brokerage companies that are controlled by regulators. Regulators limit the admitted risks of a company: capital adequacy policy. As a result a solvency and capitalization of brokers are preserved at critical level. Take your time and look at the terms of regulation and admitted risks. Try as much as possible to evaluate a capitalization of broker. If the shares are traded on the stock exchange, it is not difficult. Some companies are audited and their public reports are available;<\/li>\n
  3. Carefully read the Customer Agreement, in particular sections of mutual responsibilities;<\/li>\n
  4. Diversification. We use different types of strategies and trade at different timeframes. So why not distribute our strategies among several brokerage firms. In this case, the probability of significant losses, caused by liquidity gaps, is sufficiently decreased.<\/li>\n<\/ol>\n

    Thank you Sergey for taking the time to share your thoughts on the Swiss franc crisis for our latest forex interview<\/a>. <\/strong><\/p>\n

    To find out more about IFC Markets and to read Sergey’s analysis, please visit IFC\u00a0Markets<\/strong> at www.ifcmarkets.com<\/a>.<\/strong><\/p>\n

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     <\/p>\n","protected":false},"excerpt":{"rendered":"

    By Zachary Storella, CountingPips.com Today, I am very pleased to bring you our latest forex interview with Sergey Kamenshikov from IFC Markets. Sergey is currently the Chief Financial Analyst of IFC Markets, a forex brokerage licensed by the British Virgin Islands Financial Services Commission (BVI FSC). In this interview, Sergey shares his views on the […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-67352","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/67352","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=67352"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/67352\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=67352"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=67352"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=67352"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}