Weekly review: Mr. President, have pity on the FX workin’ man

By:
Russell J. Dinnage
Published on:

Storm clouds roiled through the FX market this week as declining third quarter trading revenues at several of the leading banks in the Euromoney survey swept through several trading desks like a Frankenstorm of dismay.

One leading forex analyst told EuromoneyFXNews that he believes FX revenues will be down 25% year-on-year for the full year 2012 as both Deutsche Bank and UBS reported that their Q3 forex turnovers had dropped compared to Q3 2011.

Deutsche Bank said that while earnings across its Fixed Income, Currency and Commodities business were up 65% compared to Q3 2011, currency revenues were "significantly lower than the prior year due to compressed margins."

And UBS – which very publicly fired 10,000 of its staff globally earlier in the week – said on Wednesday that FX revenues decreased in Q3 due to lower volumes and reduced volatility in the market.

Despite having a bad week all around, UBS said it maintains its commitment to FX and that its "leading foreign exchange business" will continue to be a "cornerstone" of the Swiss bank’s services.

Things weren’t quite as rosy at Credit Suisse’s Asia Pacific operations as seven members of the bank’s FX and fixed-income teams in the region departed the bank for pastures new.

Credit Suisse is now said to be reorganizing its FX team in the Asia, and will be relocating its forex operations in the region to the bank’s Singapore office, according to a source with knowledge of the matter.

Elsewhere, EuromoneyFXNews Managing Editor Hamish Risk came to the defence of the high frequency trading (HFT) firms in an editorial Thursday, arguing that a Dow Jones newswires story out Wednesday added unnecessary fuel to fires in the market stoked by those who believe such participants add little value to the FX space.

Risk said that the Dowjones newswires story, which highlighted a spat between multi-dealer platform operator Thomson Reuters and hedge fund Lucid Markets, was a side story in the bigger picture of how HFT firms interact in today’s FX market.

"FX exchanges are currently going through a process of quite considerable change and reconfiguration," Risk says in his op-ed. "What the Lucid story really highlights is that Thomson Reuters needs to realise that it is being left behind" compared to competing venues.

Rounding off the week nicely was some excellent analysis from EuromoneyFXNews Deputy Editor Peter Garnham on why selling pressure on the EUR will abate after the Swiss National Bank (SNB) released its currency reserve diversification figures Wednesday.

Garnham reasoned that the SNB took advantage of better market conditions to cut its EUR holdings in Q3, suggesting that a main source of selling pressure on the single currency has run its course unless fresh concerns over eurozone sovereign debt resurface.

Meanwhile, Saxo Bank – the Danish online FX broker – gave EuromoneyFXNews an advance viewing of its first piece of dealing hardware aimed at the active currency trading seeking to enhance his speed on the company’s dealing platform.

The device includes four pre-defined "hot" keys for the most popular currency crosses, and SaxoTrader clients can use it to trade directly from the keypad, switching accounts as needed and selecting amounts while acknowledging trade confirmations without using a computer mouse.

Finally, the US economy posted a tidy set of jobs figures Friday, with the nation’s employers adding 171,000 positions in October, says the US Labor Department.

But with the US unemployment rate ticking up slightly to 7.9% last month from 7.8% in September, the scene is perfectly set for an interesting election on Tuesday, November 6.

Watch this space.