So the world is beginning to think that it is all over and done with, that the financial crisis of 2008/9 which conjured up that of the 1930’s is waning and growth will soon return to the land. And for a while, I was thinking the same thing – and beginning to scare myself into believing what the politicians and biased TV pundits (analysts) have been saying.
But not anymore.
Rumor has it that we all should be on the lookout for something that I warned about several months back – and the rumors are coming out of the Federal Reserve in the US and Bank of England as well.
It seems as if much work is being done (behind the scenes so as not to cause an alarm) , to stave off a commercial real-estate meltdown which resulted from the drop in property prices coupled with lack of capital and consumer spending.
Their efforts could quite possibly be thwarted by a large spike in foreclosure rates in the US and England. Many of these properties had mortgages on them that were a part of the Wall Street derivatives market – the same sort of investment tool that many credit with causing this crisis to begin with, but on a much grander scale.
According to the Wall Street Journal, $700 Billion worth of these commercial mortgage backed securities are in serious trouble – and a collapse of them would cost close to five times that number to manage.
The effect that this would have on Forex trading is profound as just as the economy seems to have recovered from the tsunami, the aftershock comes and sets back all that has been done.
The US Dollar and British Pound are very vulnerable, especially since they have spent so much time and effort playing down the amount of damage being done – while all along the crack was actually getting wider and spreading.
Not only could a meltdown in this sector, which is inching closer to reality, harm the economies – it will adversely affect the currencies as governments spend more money they do not have to fix it.
GBP - The British Pound Sterling rose on Friday, supported by data that showed the UK economy contracted at a slightly slower pace than was initially expected. Analysts had expected a .8% fall for the quarter but were surprised with a .7% decline.
Despite the good seemingly upbeat news, the British economy still fared much worse than other industrialized countries. France, Germany and Japan have all emerged from recession during the April-June period.
At the close of the Forex market, the Sterling was -.09% to the US Dollar, up .2% to the Euro to .8789, up.02% to the Swiss Franc to 1.7236, up .25% to the Japanese Yen to 152.18 and up .3% to the Canadian Dollar to 1.7753.
Monday, August 31, 2009
Thursday, August 20, 2009
Forex Blog: Some smart opportunities
The Australian and New Zealand Dollars have been fairing pretty well these past few weeks.
Optimism about the state of the economy and the transparency of government efforts to save what they can of their thriving commodity export business has done them well.
Forex traders are aware of the highs being made by these currencies, and specifically at the US Dollars expense.
The recent sale of US Dollars by China had done much to help these countries. With China being the primary buyer of their minerals and metals, the sale of US Treasuries signals China’s unwillingness to stop their rampant buying.
I personally feel this is a mistake but I am glad they are doing it as it is helping the currencies I like to trade the most. The problem I see arising in the near term though is the rise in prices of core materials.
The Chinese can't continue funding their purchases by selling off their US reserves, it will only serve to hurt the value of the Dollar in the long run – and as holders of 3 Trillion Dollars worth, it is a significant amount that they have at stake.
China needs to come to terms with the state of the economy and slow down on their spending right now. This can help them in two ways:
1. The amount of buying they are doing is causing increased demand which is driving up prices, if they slow down, prices fall and they can save money.
2. The amount of money they are spending stockpiling raw goods could be better spent taking up larger stakes in the US Dollar, by doing so they increase their political influence and are in a better position to get what they want out of the US.
As well, it will help their cause with World Bank members in their efforts to establish a global reserve currency.
Online Forex readers know all too well that things are not what they seem. The recent stock selloff in Asia has traders nervous.
It would go a long way to calming markets if China were to step up and seize the moment here – it could also change the way people think en masse about the US Dollar and Renminbi as a valuable trading tool.
Tuesday, August 18, 2009
Online Forex Blog: China and the USD
As I was reading a newspaper, came across a well muted tidbit of information that, if it continues, could serve to hurt the Dollar in the near and demolish it in the long term.
China, the US’s largest investor, sold off a significant chunk of its T-Bills in June. Now, in recent months there has been much talk from China about their concerns regarding the US’s debt load, but trust me on this, they would not be selling the debt at this time if they did not have to.
If they did, they stand to lose a serious amount of money if the prices go down based on the sheer volume as well as psychological implications of the act.
According to other sources I read after my curiosity was peaked, it seems as if the Chinese government is spread a bit too thin right now – having increased their feverish purchase plan of almost every natural resource in the Eastern hemisphere while investing heavy in mineral and oil excavation Africa as well.
In an economy that thrives on exports to be spending as large as they have been under conditions that are being equated with the Great Depression is just plain crazy – and culturally it was probably not easy for them to stop when they realized this.
Culturally, the Chinese are all about not making mistakes or miscalculations and while they were saying things were fine, they were really not.
The theory here is that the Chinese need to unload some of the 3 Trillion greenbacks they have to raise cash – by no means am I saying that China is in trouble, but they are not as well off at this point as everyone thought.
If this is the case, Forex traders can worry if they are long Dollar positions. The fact is, the Chinese have so much impact on the Forex at this moment based solely on their reserve levels, that the hint of a selloff would panic the market.
I don’t believe the Chinese want to hurt the Dollar, I will say this a thousand times, it is not in their interest to do so.
I just think that their needs might inadvertently lead to this and there is nothing anyone can do about it. For now, I will keep my nose in the online Forex world and ears to the whispers – perhaps I can help make more sense of this as the weeks go by.
China, the US’s largest investor, sold off a significant chunk of its T-Bills in June. Now, in recent months there has been much talk from China about their concerns regarding the US’s debt load, but trust me on this, they would not be selling the debt at this time if they did not have to.
If they did, they stand to lose a serious amount of money if the prices go down based on the sheer volume as well as psychological implications of the act.
According to other sources I read after my curiosity was peaked, it seems as if the Chinese government is spread a bit too thin right now – having increased their feverish purchase plan of almost every natural resource in the Eastern hemisphere while investing heavy in mineral and oil excavation Africa as well.
In an economy that thrives on exports to be spending as large as they have been under conditions that are being equated with the Great Depression is just plain crazy – and culturally it was probably not easy for them to stop when they realized this.
Culturally, the Chinese are all about not making mistakes or miscalculations and while they were saying things were fine, they were really not.
The theory here is that the Chinese need to unload some of the 3 Trillion greenbacks they have to raise cash – by no means am I saying that China is in trouble, but they are not as well off at this point as everyone thought.
If this is the case, Forex traders can worry if they are long Dollar positions. The fact is, the Chinese have so much impact on the Forex at this moment based solely on their reserve levels, that the hint of a selloff would panic the market.
I don’t believe the Chinese want to hurt the Dollar, I will say this a thousand times, it is not in their interest to do so.
I just think that their needs might inadvertently lead to this and there is nothing anyone can do about it. For now, I will keep my nose in the online Forex world and ears to the whispers – perhaps I can help make more sense of this as the weeks go by.
Wednesday, August 12, 2009
Forex Market: some basic facts
What is the Forex market? The online trading environment for foreign exchange is the largest, most dynamic capital market in the world, with about 5 trillion US Dollars traded in it daily.
The Forex market is a continuous, 24/5 marketplace, open from Sunday afternoon (4 PM EDT) through the close of the US markets on Friday (5 PM EDT).
The Forex market is where investors can trade one currency against another currency. What is a currency cross?
All trades take place between two different currencies (currency pair), resulting in the purchase of one currency and sale of another.
For example, when you trade EURUSD, the currency cross is Euros versus US dollars. One currency will be bought (long position) while the other currency is sold (short position). What is the Bid-Ask Spread?
The bid-ask spread is the buying and selling spread between two currencies. The bid price is the price at which the currency is sold. The ask price is the price at which the currency is bought.
The difference between the two is known as the bid-ask spread. The bid-ask spread differs between currency crosses with more common crosses (majors) having tighter spreads.
The Forex market is a continuous, 24/5 marketplace, open from Sunday afternoon (4 PM EDT) through the close of the US markets on Friday (5 PM EDT).
The Forex market is where investors can trade one currency against another currency. What is a currency cross?
All trades take place between two different currencies (currency pair), resulting in the purchase of one currency and sale of another.
For example, when you trade EURUSD, the currency cross is Euros versus US dollars. One currency will be bought (long position) while the other currency is sold (short position). What is the Bid-Ask Spread?
The bid-ask spread is the buying and selling spread between two currencies. The bid price is the price at which the currency is sold. The ask price is the price at which the currency is bought.
The difference between the two is known as the bid-ask spread. The bid-ask spread differs between currency crosses with more common crosses (majors) having tighter spreads.
Monday, August 10, 2009
"We shall say that the recession ended in July or August, maybe September"
The positive financial data that was flowing during the last ten days to the US, are indicating that the end of the recession might be over seems to be more consistent this time.
If you have been reading my previous posts, you surely know the Forex markets have been going up and down consequently to new positive data publishes at the US.
Yesterday said Laura Tyson, adviser to President Barack Obama, that "We may have hit stability, we may be in the beginning of an upturn".
From his side, Paul Krugman, a Nobe Prize winning economist said that the deepest slum since the Great Depression might be ending: "it is quite possible, though not certain, that retrospectively, we shall say that the recession ended in July or August, maybe September".
Both key persons said the above words in the Malaysian capital, Kuala Lumpur. Krugman based his assessment on last week report issued by the US government, that showed the pace of job losses at the US was slower than expected, and the fact that the unemployment rate at the US dropped for the first time in 15 months. Another datum that corroborated this stand is that manufacturing, although still contracting, is on the mend.
So this time, it does seem to me that the situation is getting rosier… On the other hand, let's not forget that psychological factors are also at play here, who doesn’t want a crisis to be over, whether at home, at your personal life, your private business or the global financial market ?
If you have been reading my previous posts, you surely know the Forex markets have been going up and down consequently to new positive data publishes at the US.
Yesterday said Laura Tyson, adviser to President Barack Obama, that "We may have hit stability, we may be in the beginning of an upturn".
From his side, Paul Krugman, a Nobe Prize winning economist said that the deepest slum since the Great Depression might be ending: "it is quite possible, though not certain, that retrospectively, we shall say that the recession ended in July or August, maybe September".
Both key persons said the above words in the Malaysian capital, Kuala Lumpur. Krugman based his assessment on last week report issued by the US government, that showed the pace of job losses at the US was slower than expected, and the fact that the unemployment rate at the US dropped for the first time in 15 months. Another datum that corroborated this stand is that manufacturing, although still contracting, is on the mend.
So this time, it does seem to me that the situation is getting rosier… On the other hand, let's not forget that psychological factors are also at play here, who doesn’t want a crisis to be over, whether at home, at your personal life, your private business or the global financial market ?
Tuesday, August 4, 2009
Forex: Some info about The Mexican Peso
Forex Blog: The Mexican Peso
The Mexican Peso has been the worst performing currency on the past year. Forex traders and investors are giving up on Felipe Calderon, the Mexican President, on implementing the tax measures needed for controlling the deficit in the budget.
Mexico's economy, which is the second biggest economy in Latin America after Brasil, has shrunk 11% on the second quarter of present year.
Among the factors that influenced on this, were the swine flu outbreak and the closing of factories along the border with the US.
According to the Central Mexican Bank, the Mexican economy is expected to contract 7.5% this year, the worst since 1932.
Forex traders and investors are becoming a bit skeptic about the Mexican forex market, since they don't know exactly when the local problems will be fixed. They predict that the Peso will become unstable now that Calderon lost some seats on the congress elections that, fact that will make it even more difficult to support a law for implementing higher taxes.
Forecasts claim that the Mexican Peso will go down against the dollar in about 12.7% to 15% (the rate today is 13.1024).
Over the past year, the Peso has going down against the dollar in a 24%, and it has been the worst performing major currency over the past decade.
The Mexican Peso has been the worst performing currency on the past year. Forex traders and investors are giving up on Felipe Calderon, the Mexican President, on implementing the tax measures needed for controlling the deficit in the budget.
Mexico's economy, which is the second biggest economy in Latin America after Brasil, has shrunk 11% on the second quarter of present year.
Among the factors that influenced on this, were the swine flu outbreak and the closing of factories along the border with the US.
According to the Central Mexican Bank, the Mexican economy is expected to contract 7.5% this year, the worst since 1932.
Forex traders and investors are becoming a bit skeptic about the Mexican forex market, since they don't know exactly when the local problems will be fixed. They predict that the Peso will become unstable now that Calderon lost some seats on the congress elections that, fact that will make it even more difficult to support a law for implementing higher taxes.
Forecasts claim that the Mexican Peso will go down against the dollar in about 12.7% to 15% (the rate today is 13.1024).
Over the past year, the Peso has going down against the dollar in a 24%, and it has been the worst performing major currency over the past decade.
Monday, August 3, 2009
All the reasons for Forex traders to be optimistic
Forex BLOG: Some strong indicators about the economy...
The yen has declined today and the pound roused following Alan Greenspan evaluation that the recession has come to it's end and reports about HSBC Holdings making unexpected profits.
Greenspan, the ex Federal Resrve chairman, also said (during an interview he gave to ABC) that the economic grow might come at a faster path than expected (he predicted a 2.5 growth in the current quarter).
The Japanese yen fell against the major currencies, following a demand for higher yielding in th Forex market; on the other hand, a report from the "Institute for Supply Management" reports that the US manufacturing has shrank on the past month of July at the slowest rate in the past year.
At 7 am, NY time, the yen went down 1% against the pound (159.76), in a 0.5% against the euro (135.70) and 0.3% against the dollar (94.97).
Additionally, currencies influenced by the prices of raw materials, like the Australian dollar, have gone up following an appraisal that commodities will go on rallying on 2010, as the global recession resumes.
This forecast has been taken most seriously, since it has been given by Nouriel Roubini, the NY University financial expert who predicted the financial crisis.
Another report has indicated that manufacturing has expanded in July – the China Purchasing Managers' Index – CLSA has reached 52.8, the highest level in a year.
What can I say? it seems to me that this time the indicators that the recession is getting to its end are a bit stronger than on past occasions, so - all the reasons to be optimistic...
The yen has declined today and the pound roused following Alan Greenspan evaluation that the recession has come to it's end and reports about HSBC Holdings making unexpected profits.
Greenspan, the ex Federal Resrve chairman, also said (during an interview he gave to ABC) that the economic grow might come at a faster path than expected (he predicted a 2.5 growth in the current quarter).
The Japanese yen fell against the major currencies, following a demand for higher yielding in th Forex market; on the other hand, a report from the "Institute for Supply Management" reports that the US manufacturing has shrank on the past month of July at the slowest rate in the past year.
At 7 am, NY time, the yen went down 1% against the pound (159.76), in a 0.5% against the euro (135.70) and 0.3% against the dollar (94.97).
Additionally, currencies influenced by the prices of raw materials, like the Australian dollar, have gone up following an appraisal that commodities will go on rallying on 2010, as the global recession resumes.
This forecast has been taken most seriously, since it has been given by Nouriel Roubini, the NY University financial expert who predicted the financial crisis.
Another report has indicated that manufacturing has expanded in July – the China Purchasing Managers' Index – CLSA has reached 52.8, the highest level in a year.
What can I say? it seems to me that this time the indicators that the recession is getting to its end are a bit stronger than on past occasions, so - all the reasons to be optimistic...
Sunday, August 2, 2009
Global recession might end - and the dollar weakens
Following signs that global recession might end, the dollar weakens to lowest rate of the year.
Once again, following optimism about an imminent global recovery, the dollar has declined, reaching its lowest level of the year (this is a common "symptom" in the forex markets, as the greengack is regarded as a "refuge", "low-risk" currency, preferred by traders and investors at times of uncertainty).
The Dollar Index, used by the ICE futures exchange in order to track its value against other major currencies was 78.22 on Friday, the lowest rate since December 18th. The index has dropped 2.3 percent in July.
As well, on Friday, the US dollar went down 1.3% against the euro. This was an outcome of a report that showed that the US economy has contracted in a lesser amount that expected by economists, indicating, MAYBE, that the global recession is coming to an end.
Another positive indicator is that the GDP of the US contracted "only" 1%, after shrinking 6.4% in previous quarter, the highest rate on the last 27 years, as reported by the Commerce Department.
Let's not forget as well the things that Ben Bernanke, the Federal Reserve Chairman, told Congress last month about maintaining a "highly accommodative" monetary policy, and his words to the Financial Services Committee about the economy making "tentative signs of stabilization".
What can I say, I do hope from the bottom of my [forex trader] heart that this time the signs are authentic and we are not talking about another false alarm, but even so, we, the forex investors will keep ourselves informed so that we shall know how to cope with every situation!
Once again, following optimism about an imminent global recovery, the dollar has declined, reaching its lowest level of the year (this is a common "symptom" in the forex markets, as the greengack is regarded as a "refuge", "low-risk" currency, preferred by traders and investors at times of uncertainty).
The Dollar Index, used by the ICE futures exchange in order to track its value against other major currencies was 78.22 on Friday, the lowest rate since December 18th. The index has dropped 2.3 percent in July.
As well, on Friday, the US dollar went down 1.3% against the euro. This was an outcome of a report that showed that the US economy has contracted in a lesser amount that expected by economists, indicating, MAYBE, that the global recession is coming to an end.
Another positive indicator is that the GDP of the US contracted "only" 1%, after shrinking 6.4% in previous quarter, the highest rate on the last 27 years, as reported by the Commerce Department.
Let's not forget as well the things that Ben Bernanke, the Federal Reserve Chairman, told Congress last month about maintaining a "highly accommodative" monetary policy, and his words to the Financial Services Committee about the economy making "tentative signs of stabilization".
What can I say, I do hope from the bottom of my [forex trader] heart that this time the signs are authentic and we are not talking about another false alarm, but even so, we, the forex investors will keep ourselves informed so that we shall know how to cope with every situation!
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