Posts Tagged "currency market"

Tapering at last

Posted by on Dec 20, 2013 in Commentary, Featured, Market News, News

Tapering 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 expect any changes to interest rates anytime soon. This is a factor in most western economies at the moment – a strong growth in demand and GDP is not filtering through to prices. Interest rates are the weapon to slow demand and prices. Until the growth in the economy starts to take up the slack capacity in the economy, we can expect interest rates to remain low. Once the threat of inflation looms, that is when we can expect real interest rates to rise. For now, the FED has set the path into 2014. This has at least given the markets some direction. This should lead to a gradual strengthening of the USD against other currencies. Now compare the US economy with Europe and the Eurozone specifically. Which one would you want to invest in? A stagnant economy trying desperately to come up with something to stimulate growth, or an economy that has already achieved that as an outcome. With that statement, it won’t take too much to work out where I figure the Euro is heading over the next few...

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A little optimism

Posted by on Jul 25, 2012 in Featured, News

A little optimism

Optimism in the markets seems as rare as sunshine in a British summer this year. But as the sun comes out, the temperature soars. Phew, it’s hot right now. The same is true with optimism and the Euro. A few comments this morning about changing the status of the European Stability Mechanism (ESM) by an ECB council member sent the Euro soaring as well. Ewald Nowotny suggested the ESM could be classified as a bank, although no formal discussions have taken place with this objective. The optimism from this simple statement had the Euro appreciating fast against the Dollar. Why does this make a difference? It means the ESM could then raise funds from the European Central Bank (ECB). It would then have, in theory, enough money to bail out Spain and still have some petty cash for Italy, another round for Greece, Cyprus, Slovenia and any other member state running into trouble. Presumably last months statement about central bank supervision of national banks could be extended to ensure the ESM is managed by the ECB. Thus creating more liquidity for governments with lopsided books, you know the sort, the books that don’t quite balance. It is this underlying desire to see some kind of a fix that will work and salvage the Euro that provides many trading opportunities. In spite of a little sunshine today, remember it’s been a very wet, cloudy, cold and miserable summer so...

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Just like buses – central banks announcements

Posted by on Jul 9, 2012 in Featured, News

Just like buses – central banks announcements

Last week was notable for news affecting the value of major currencies. We waited all week for announcements from central banks and just like buses, three came along at once. The Bank of England’s announcement to print another £50 billion was anticipated. The markets knew that was going to happen. At the moment of the announcement, a small blip in the value of GBPUSD just confirmed the inevitable. The European Central Bank then duly obliged with a quarter point cut from 1%. This bit was expected by the market. The Euro went into free fall on the back of the ECB reducing the overnight rate to 0%. Even a lay person looking at a chart for EURUSD around lunchtime on Thursday will see how the Euro fell off the cliff. The Bank of China was the third bank to change interest rates. It was unscheduled and unexpected as they cut interest rates by just over a quarter of a percentage point. Three arriving at once. It is these unexpected elements of interest rate policy that give most cause for concern. The ECB with a 0% overnight rate and the Bank of China, needing to stimulate growth in the worlds second largest economy. With pessimism the order of the day, traders can at least remain optimistic. The more changes that are made, or deemed necessary, the more currencies will move. The more they move, the more trading opportunities there are for us to profit in the...

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