The treasurer and data

| 13-12-2016 | Lionel Pavey |

dataTreasurers are confronted with new data every day – just think of the daily download from the bank statements. As this is a constant process, treasurers need to able to perform real-time financial analysis.

This analysis has to be performed with various internal data management sources, together with external data such as foreign exchange and interest rates. Originally this was done with rather large static data like annual budgets, but nowadays there appears to be a change in sentiment towards more proactive rolling forecasts.

The treasurer has a multitude of tasks including cash flow forecasting, hedging of foreign exchange and interest rates, investing excess funds, acquiring funding, advising on liquidity and financial risks, maintaining relationships with financial institutions. To be able to do all this requires a good continuous flow of internal data, together with an understanding of data analysis.

Treasurers need to be more proactive and interact and understand the requirements of all departments and divisions within the company. They need to be able to zoom in and out between the macro and micro levels and gain a better understanding of the business fundamentals through the whole scope from procurement to sales.

 The 5 biggest challenges

  • Receiving timely and accurate data
  • Recognizing and acting on data – both structured and unstructured
  • Keeping abreast with the constant changes in data technology – blockchain
  • Becoming truly proficient at data analytics
  • Continuous feedback to data providers to show how their data has been incorporated and used

So, just a few extra activities on top of the normal roles of forecasting, negotiating, risk management, and people management.

It is clear that the duties of a treasurer are many and that the job is a very special one requiring both proactive and reactive skills. For all of this to work, companies have to get all relevant staff to think the same way and understand the importance of continuous, timely and accurate data. Good structured data analysis can transform a company’s understanding of its business and provide important insight into its workings. This can lead to better knowledge of customers’ requirements, working capital flows, comparing internal data to industry or sector trends, changes to strategic thinking etc.

There are 2 sorts of data scientists: First those who can extrapolate from incomplete data….

Lionel Pavey


Lionel Pavey

Cash Management and Treasury Specialist – Flex Treasurer

EUR/USD beweging na de verkiezingen in Italië

| 6-12-2016 | Udo Rademakers |

foreign-currencyWaar zondagnacht (11 PM Amsterdamse tijd) de EUR/USD nog een aardige push omlaag kreeg vanwege de ‘Italië-uitkomst’, is dit weer ongedaan gemaakt tijdens de Europese openingsuren. Van paniek is geen sprake, aangezien een beweging van een cent relatief gezien gering is.

Politici haasten zich wederom met uitspraken dat Italië een sterk land is, er is toewijding alom, en er wordt gezegd dat een  ‘nee-stem van Italië geen stem is tegen de EU’ enzovoorts. Echter, het valt moeilijk te ontkennen dat Europa in instabiel vaarwater verkeert. Forex koersen op de (zeer) korte termijn worden vooral door de publicatie van economische data, politieke onzekerheid, aanslagen en dergelijke beïnvloed. Deze bewegingen vinden plaats binnen langere termijn trends (waves).

De EUR/USD beweegt zich sinds februari 2015 grofweg in een range van 1,05 (onderkant) en  1,15 (bovenkant). Vooral in de laatste 3 weken is de EUR/USD relatief sterk gedaald (van 1,11 naar 1,05). De support heeft daardoor (tijdelijk?) zijn werk gedaan. Echter, ik verwacht dat binnenkort richting wordt gekozen (en dan richting het Zuiden) , de volatiliteit toeneemt en ‘sell the rallies’ een interessante strategie kan zijn op het huidige niveau van 1,0720.

Een sensibilisatie van ‘risk awareness’ bij de afdelingen inkoop, verkoop en de CFO heeft een sleutelrol. Mede gezien bovenstaande, bied mij dit een gelegenheid om ook in mijn huidige opdracht een nadruk te leggen op valutarisico´s en dit een integraal onderdeel te maken van een degelijke, actuele  ‘STP multi currency forecast’ die snel te implementeren is om bij toenemende volatiliteit de kans op „negatieve verrassingen“ beperkt te houden.  De volgende stap is om met SMART indicatoren de risico´s waar nodig af te dekken en zelfs te kunnen profiteren van de huidige omstandigheden (middels opties bijvoorbeeld).

Udo RademakersUdo Rademakers – Independent Treasury Consultant & Interim Manager

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To be or not to be – what happens next to the Euro?

| 22-11-2016 | Lionel Pavey |

In the last few weeks, there have been many news articles published, by well-known people, about the state of the union:

  • Frits Bolkestein (former European Commissioner) – monetary union has failed. In 10 years there will be a large D-mark block in northern Europe
  • Joseph Stiglitz (Nobel prize winner Economics) – the euro’s days are numbered
  • Otmar Issing (former chief economist ECB) – one day the Euro “house of cards” will collapse
  • Jacques Delors (former president of the EC) –  at some point, Europe will be hit by a new economic crisis. We do not know whether this will be in six weeks, six months, or six years. But in its current set-up, the euro is unlikely to survive that coming crisis.

End of the Euro?

More than 15 years after its creation, has the Euro run its course? After countries put all their effort into meeting the convergence criteria, did they forget to look at the diverging competitiveness between themselves?

There are numerous political elections and referendums in the next year – Italian constitutional referendum, elections in Austria, France, Germany and the Netherlands. There appears to be a rise in anti-European sentiment expressed by both voters and politicians. After the perceived surprise results in the Brexit referendum and the presidential elections in America, it would be prudent to consider all possible outcomes.

So what would happen if the currency union ceased to exist? We can look back in recent history to the breakup of both the Soviet Union in the 1990’s and the Austro-Hungarian Empire in the 1920’s. A split in the current Eurozone would appear to follow a North-South divide, leading to a revaluation of the currencies in the North and a devaluation in the South. Thanks to modern technology it would be possible to sell bonds of southern countries and move the proceeds to the north almost instantaneously. Despite the huge upheaval – rising inflation and unemployment, declining growth and investment, the situation would eventually normalize as can be seen in the new countries that were previously part of the Soviet Union. But this would all come at a very large price.

Consequences for companies

But what about the consequences for companies? If a contract existed between a Dutch company and an Italian company many questions would need to be answered – which contract law takes preference, in what currency should the contract continue, who bears the risks involved? What happens to a loan extended to a Spanish company by an Austrian bank and denominated in Euros that are no longer legal tender? It would be prudent to look at all the possible risks that a company could face if the Euro were to replaced by national currencies – what cross border contracts do they have, what is the impact to the company’s profit if the new currency devalues, what are the terms and conditions in existing loan documentation regarding covenants, how many new bank accounts would need to be opened to allow trading to continue.

Can the Euro survive? Personally, whilst the idea was good, the reality has been different. It requires a complete “One Europe” – monetary, fiscal, political, defence, law etc. Could this ever be achieved and do the people of Europe really wants this – now that is the question.

Lionel Pavey


Lionel Pavey

Cash Management and Treasury Specialist – Flex Treasurer



FX volatility creates opportunities

currencies| 18-10-2016 | Victor Macrae |

The British pound has strongly decreased in value against other major currencies such as the US dollar and the euro. Such FX movements can negatively impact firms’ financial statements and destroy firm value. On the other hand, they can also create opportunities. I would like to demonstrate this on the basis of a real case of a European based industrial firm which has the euro as functional currency. We’ll discuss two scenarios.

First, some time ago the firm was negotiating a takeover of a British firm. In anticipation of the M&A transaction it purchased British pounds against euros. However, the deal was unexpectedly cancelled. As a result the firm had to sell the pounds again. Luckily, the pound had strengthened against the euro in the meantime and the firm ‘gained’ millions due to the failed acquisition. This could however easily have been a ‘loss’ in case of a weakening of the pound. The ‘no FX strategy’ was in the firm’s favour this time, but I wouldn’t bet on it.
If you are thinking about a takeover in the UK (or any other country where the local currency is under pressure) it is wise to consider multiple FX hedging strategies. For instance, using options for these type of transactions not only provides you with a way out if the acquisition is not closed as an option gives you the right but not the obligation to purchase the FX. Furthermore, when the payment is due it also gives you the opportunity to buy the currency at the option’s strike price or at the lower prevailing market rate if the case.

Second, a characteristic of this industrial firm is that it is very dominant in its core markets. Due to this position, the firm predominantly sells its products in euro, also to customers with a different home currency. While it may seem that there is no FX risk, this strategy has led to currency issues, for instance in the Russian market. Due to the weakening of the Russian rouble against the euro, the firm’s products have become more expensive up to a point where sales in Russia have nearly ceased to exist. Russian customers cannot afford to pay the euro prices and demand pricing in roubles or a discount on the euro price.
This is an example where a firm’s exchange rate policy influences its core business activities. A solution could be to move production to Russia, and possibly to produce for other regions as well, although this has consequences far beyond the FX issue which have to be taken into account.

Both examples show that FX volatility can create opportunities. FX risk management should support the core activities of a firm and not the other way around. But if creative FX management helps create firm value, why not benefit?


Victor Macrae


Victor Macrae

Owner of Macrae Finance



Share your knowledge with the treasuryXL community!

| 26-08-2016 | treasuryXL|

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Follow up: Valutaoorlog

| 19-08-2016 | Simon Knappstein |



Gisteren publiceerden we al een artikel over de valutaoorlog die volgens een bericht in het Financieele Dagblad gaande is. De winnaar lijkt degene te zijn met de meest dalende munt. Experts Erna Erkens en René Schilder gaven hun mening over deze vermeende valutastrijd. Vandaag is FX expert Simon Knappstein aan de beurt om zijn visie met ons te delen.



Deze valutaoorlog is in 2009 begonnen door de Fed toen die besloot de wereld met een tsunami van dollars te overspoelen. Nadien volgden de BoJ en de ECB waarbij beide Centrale banken het doel om inflatie te importeren door de munt te verzwakken overduidelijk nastreefden.

Ondertussen lijkt het mes van de geldverruiming behoorlijk bot geworden. EUR/USD bevindt zich al 2,5 jaar rond de 1.10 waarmee het effect op de inflatie op jaarbasis nul geworden is. En voor de JPY lijken de factoren zoals de status als safe haven plus het uitblijven van renteverhoging in de US zwaarder te wegen dan de geldverruiming en negatieve rentes, want de JPY is in de afgelopen tijd alleen maar in waarde gestegen.

Ik verwacht dat macro-economische factoren de komende tijd verder de overhand zullen gaan krijgen over monetaire factoren bij het richting geven aan valutakoers ontwikkelingen.

Simon Knappstein - editor treasuryXL


Simon Knappstein

Owner of FX Prospect



USD/TRY, where to after the failed coup?

02-08-2016 | Simon Knappstein |



In my July consensus FX forecasts report USD/TRY was expected to rise to 3.11 in 12 months’ time. These forecasts were given prior to the attempted coup. 




Now, two weeks further, the domestic situation in Turkey is clearly stabilising and it is a fine moment to take a look at the opinions of ING and Rabo on the outlook for USD/TRY. Rabo is currently expecting that USD/TRY will move to 2.90 in 1 year and ING is looking for USD/TRY to rise to 3.35 in 1 year’s time.

Rabo holds a relatively constructive view on the Lira based on a fairly strong economic growth and a high carry that tempts investors looking for yield. At the same time it sees the fact that Moody’s may downgrade Turkey’s credit rating to below investment grade as a clear risk. Such a downgrade, based on the post-coup political situation of increased concentrated political powers in the hands of President Erdogan that might lack the necessary rule of law and checks and balances, might trigger another wave of capital outflows from Turkish bonds and weaken the TRY significantly.
ING focuses on the easing cycle and also on the risk of a downgrade, both factors that would clearly keep the TRY under pressure. Furthermore it still sees idiosyncratic risks like the current account deficit, the large currency risk carried by the corporate sector and geopolitical risks all pointing to a weaker TRY.

My take away from this for the near term is that in the current benign market conditions the high carry may be the most important factor supporting the TRY and drive USD/TRY lower. A major risk is that Turkey’s credit rating may be downgraded to junk, maybe already within the next couple of days, which would seriously weaken the TYR.

Simon Knappstein - editor treasuryXL

Simon Knappstein

Owner of FX Prospect


De markt is veranderd.

| 06-07-2016 | René Schilder |

marktDe afgelopen week zijn er grote verschillen gezien in de koers van de Britse pond na de uitslag van het referendum. In januari 2015 werd de markt ook al eens verrast door een onverwachte gebeurtenis: De Zwitserse Centrale Bank (SNB) veroorzaakte toen een schokgolf met het onverwacht loslaten van de ‘peg’ tussen de EUR en de CHF.

De paniek die toen ontstond op de valutamarkt zorgde ervoor dat er geen koers van EURCHF bekend was. Dit betekende dat het op dat moment niet mogelijk was om een transactie af te sluiten voor EURCHF. De grote les die toen door marktpartijen is geleerd, is het onderling opnieuw afstemmen van de exacte definitie van een order. Een stop loss order kan voor een grote afwijking (verlies) zorgen (er zijn meerdere brokers die dag failliet gegaan vanwege deze gebeurtenis). In de week voor het Britse referendum hebben meerdere banken een signaal afgegeven aan partijen die werken met FX orders hier zeer voorzichtig mee om te gaan.

Banken zijn altijd een zeer actieve marktpartij geweest in de valutahandel. De grootbanken hadden zelfs een proprietary desk. Hier handelde men voor ‘eigen rekening en risico’. Deze handelaren kwamen in actie als er grote bewegelijkheid was in de markt. Men nam orders op hun eigen boek voor een aantal uren/dagen in verwachting dat als de rust op de markt zou terug keren de liquidatie van deze order een betere prijs voor hen zou opleveren. Deze proprietary desks zijn altijd een betrouwbare vorm van liquiditeit geweest. Door veranderende regelgeving is het voor banken tegenwoordig verboden om aan proprietary trading te doen.

Tegenwoordig werken marktpartijen ook met ‘algorithmic orders’, dit is automatische executie via handelssystemen (in het verlengde daarvan heeft High Frequency Trading ook de FX markt ontdekt). Dit zorgt er in de praktijk voor dat bij onverwachte gebeurtenissen iedereen op hetzelfde moment door dezelfde deur naar buiten wil. Voorbeeld hiervan was afgelopen 7 juni 2016, toen de GBP tegen de USD binnen 1 minuut meer dan 1,5 % in waarde steeg. Binnen een paar minuten was die winst weer verdwenen. Reden = onbekend. De veranderende markt heeft dus een impact op liquiditeit.

Doordat veel handel tegenwoordig elektronisch is, kan een gerucht al snel voor een paniekreactie zorgen. Als dat dan later niet wordt bevestigd, blijft de transactie gewoon staan en kan een gevoel van slechte timing achterblijven. Bij dit soort marktsentimenten is het zeer aan te bevelen risico’s die afgedekt moeten worden zo snel mogelijk uit te voeren en niet te speculeren op een beter moment. De ervaring leert dat zelfs de echte professionals daar hun vingers niet aan willen (en mogen) branden.

Voor bedrijven en financiële instellingen die hedging policies voor hun treasury hebben, is nu een belangrijk moment om te kijken of deze goed hebben gefunctioneerd over de afgelopen periode.
Zorg dat de mandaten die er zijn voor executie, helder en transparant zijn omschreven. Juist in deze periode mag er geen enkele twijfel bestaan over wat van de mensen die op de treasury werken wordt verwacht. Veel handel is tegenwoordig computergestuurd (ook bij de banken) en dan kan een goede controle geen overbodige luxe zijn. Voor alle Nederlandse bedrijven die internationaal opereren is de boodschap hetzelfde: neem de tijd om goed in kaart te brengen welke financiële risico’s er zijn, nu deze markten wereldwijd grote schommelingen laten zien.

De economische gevolgen van de Brexit zijn moeilijk in te schatten op dit moment. Er zijn heel veel vragen en de komende maanden zal daar stap voor stap duidelijkheid over ontstaan. Dit zal dus zeker een bepaalde mate van onzekerheid met zich meebrengen, die zich zal vertalen in een grotere volatiliteit dan wanneer er minder onzekerheid is. Dit betekent voor ondernemingen dat men meer kosten voor hedging zal zien omdat de spreads op de handelsplatformen groter zullen zijn. Neem daarbij het voorbeeld van de afgelopen dagen dat verdere onverwachte ontwikkelingen opnieuw voor zeer grote beweeglijkheid kunnen zorgen op aandelen-, rente-, grondstoffen- en valutakoersen.

Focus voor een onderneming moet gericht zijn op zijn core business, daar wordt dagelijks het geld verdiend. Het speculeren met ‘open’ posities kan grote gevolgen hebben. In de praktijk is het namelijk één van de moeilijkste beslissingen om bij een verkeerde keuze op tijd de beslissing te herzien en het verlies te accepteren.

Voor bedrijven die nog geen regels hebben opgesteld voor hoe men bepaalde risico’s afdekt, is er na de gebeurtenissen van vorige week geen excuus meer om hier geen prioriteit aan te geven.

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reneschilder1René Schilder – Co Owner at 2FX Treasury BV

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FX Global Code of Conduct

| 09-06-2016 | Simon Knappstein |


Last month the BIS published the first phase of the FX Global Code. The final version is planned for completion by May 2017. What is this Global Code and what is the BIS trying to achieve by the establishment of this Code?

Recent history

In the wake of the Libor Scandal a similar rate rigging scandal emerged in the FX market. This related to fraudulent actions around the fixing process of FX Benchmarks. In 2013 the Financial Stability Board commissioned a working group to firstly analyse the structure of the FX Market and the incentives that might promote inappropriate trading activity around a benchmark fixing, and then come up with some potential remedies to address the problems found.

In September 2014 a report was published by the FSB containing 15 recommendations to reform the FX Benchmark process. A number of these recommendations concerned market conduct, specifically related to the fixing process.  To further restore trust in the foreign exchange market and make this market function as effectively and efficiently as possible the BIS commissioned a working group to facilitate the establishment of a single global code of conduct for the FX Market and to come up with mechanisms to promote greater adherence to the code. The first phase of this global code is now published and I will share some observations with you.

What is the Global Code?

The Global Code is a set of global principles, not rules as rules are easier to arbitrage than principles. It is meant to provide a common set of guidelines to promote the integrity and effective functioning of the wholesale FX Market, i.e. a robust, fair, liquid, open, and appropriately transparent market

Unlike for instance the Model Code by the ACI Forex, which is only intended for the sell side and more rule based, this Global Code is developed by a partnership between Central Banks and Market Participants from both sell- and buy-side globally.

The Global Code is organised around six leading principles:

·      Ethics

·      Governance

·      Information Sharing

·      Execution

·      Risk Management and Compliance

·      Confirmation and Settlement Processes

Furthermore it is emphasized that this Global Code does not supplant the applicable laws and regulations for the relevant jurisdictions. It should serve as a reference when conducting business in the FX Market.

So far, so good.

The good thing in this Global Code is that it applies to all organisations and persons active in the wholesale FX Market globally and thus creates a level playing field. The more cynical observer could argue that codes of conduct are around for decades and that these have not been very successful in preventing scandals.

Obviously, thinking of myself as an ethical and honest ex-salesperson and trader, most of these principles are a no-brainer. There is only one principle and related good practices that leaves me a bit puzzled, and that concerns Execution, sub-principle 5: The Mark Up applied to Client transactions by Market Participants acting as Principal should be fair and reasonable. Sounds fair enough, but in a competitive world with Clients comparing quoted prices and trading the most advantageous price to them, hasn’t mark-up already ceased to exist? So what is fair and reasonable about zero mark-up? Or shouldn’t Clients trade the most advantageous?

I wonder, dear reader, what your thoughts are on this?

Speech by Mr Guy Debelle, Assistant Governor (Financial Markets) of the Reserve Bank of Australia, at the FX Week Europe conference, London, 25 November 2015.
FX Global Code: May 2016 update


Simon Knappstein - editor treasuryXL


Simon Knappstein

Owner of FX Prospect

EUR/USD Outlook

18-05-2016 | by Simon Knappstein |


The US Dollar is currently going through a soft spell. Most markedly against EM, but also against the EUR. Upside seems contained so far by the very easy monetary policy of the ECB. The question is if we are witnessing simply an extension of the ranging price movement as seen in the last 5 quarters or whether this is the start of a lasting recovery?



FX Prospects consensus forecast for EUR/USD is 1.1020 in 3 months and 1.0810 in 12 months.

outlook eur/usd

Let’s take a closer look at the arguments that argue for a higher EUR/USD than consensus.
Danske Bank is in the longer term the most bullish, forecasting a shallow move lower to 1.12 in 3 months and a subsequent move higher to 1.18 in 12 months.
Nordea is looking for a move to 1.16 in 3 months only to see the pair fall thereafter to 1.05 in 12 months.

Danske is expecting for relative rates to play a more important role in the near term where the ECB will be challenged once again on its mandate by market inflation expectations and the Fed might turn out a bit more upbeat on a September rate hike. This, coupled with a Brexit risk premium weighing on the EUR as well, should lead to some downside in the next 2 or 3 months. Further out, they expect valuation to drive the EUR/USD higher to 1.18.

Nordea on the other hand, sees the EUR strengthening in the near term on a combination of a diminished likelihood of deeply negative rates by the ECB, potential risk aversion that leads to some EUR short covering and a dovish shift in the Fed’s reaction function. Further out then, as this dovish shift is reflecting an undue focus on domestic- and global risks (Brexit, China) that do not materialise, a hawkish re-pricing of the curve will support the USD at the same time that increasing inflation in the EZ is lowering real rates and leading to EUR-negative portfolio outflows. Bringing EUR/USD to the aforementioned level at 1.05 in 12 months.

These are two very different views on where EUR/USD is heading. It is not though, a matter of who is wrong and who is right. Opposing opinions help you make up your own mind and improve on your investment decisions.


Simon Knappstein - editor treasuryXL


Simon Knappstein

Owner of FX Prospect