Kiwi in Flight
It’s been a long time coming. Of the major currencies commonly traded, there have been no interest rate increases since 2010 when Australia last increased its overnight rates. Australian rates didn’t last long at those levels and were reduced in stages soon afterwards, matching the other major economies. This time though, things feel different. On Wednesday evening this week, the Reserve Bank of New Zealand announced a rise in interest rates from 2.5% to 2.75% (well, Thursday morning in New Zealand at the time). An interest rate increase in any of the major currencies is as rare as New...
Read MoreTrading in progress for 2014
The first full week of 2014 has seen trading activity resume in full. Yesterday, we had the Bank of England and European Central Bank setting interest rate policies for their economies. The UK rates were held, with UK economic news generally continuing to support sterling. With the US economic growth powering ahead, it has to be reckoned that the Eurozone will eventually arrive at the party and benefit from this growth, in turn returning to growth. However, the Euro was under pressure yesterday as growth is lacklustre to say the least. Probably more accurate to say lacking instead. That was...
Read MoreTapering at last
The biggest talking point among traders for several months now has been “When will the FED start tapering?”. At least we know the answer now. Wednesday’s FED meeting announced a reduction in the amount of money being thrown at the market, reduced by $10bn a month from $85bn to $75bn. This really is a symbolic gesture. In the overall scheme of things, a reduction of $10bn a month being pumped into the US economy is neither here or there. The economic output of the US economy is well over $15,000bn and growing strongly. The other aspect of the FED announcement was not to...
Read MoreStalemate
We reach yet another stalemate as the dominance of the central banks in the currency markets continues after the latest FOMC meeting. The continued manipulation of interest rates through quantitative easing continues. A growing economy being primed by $85bn of money every month, or $1 trillion annually. The FED has on numerous occasions hinted at tapering, but keeps shying away from taking the plunge. It could signal a readiness to reduce the stimulus and avoid the continual back tracking by reducing the stimulus to $80bn a month. In the overall scheme of things, I hardly think a $5bn...
Read MoreHappy Landings as quantitative easing slows
A couple of weeks ago, helicopter Ben (a.k.a. Ben Bernanke) announced the Federal Reserve was going to slow down the rate at which it was printing money. The printing presses, known as quantitative easing were always going to stop at some point. The fact that so much notice was given shouldn’t have come as a surprise. But it jolted the market. In my view, we should look at the background to the announcement, which is a return to economic growth and a fall in unemployment. Over the past few months, the stimulus of billions of dollars being printed aligned with low interest rates has...
Read MoreCurrency Wars
One of the trading themes for 2013 is likely to be the continuation of currency wars. Real or perceived, currency wars have existed for as long as I can remember. Whether a devaluation of an existing currency, or revaluation, currency wars cause seismic movements in exchange rates. The latest country to join the currency wars game is Japan, with the Japanese Yen losing value against all major currencies since elections a couple of months ago. The Bank of Japan, under political direction from the incoming government has agreed to raise it’s inflation target and adopt quantitative...
Read More