Fed cuts by 50 bps. | |
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A surprisingly large cut, which is hurting the USD .
Overnight News Bullets - SZ Industrial Production Q2, out at 6.7% vs 5.2% exp. YoY out at 9.8% vs 8.3% exp.
- SW GDP Q2, out at 0.9% vs 1.0% exp. YoY out at 3.5% vs 3.6% exp.
- UK CPI Aug, out at 0.4% in line with exp. YoY out at 1.8% vs 1.9% exp.
- UK Core CPI YoY Aug, out at 1.8% in line with exp.
- UK Retail Price Index Aug, out at 207.3 vs 207.0 exp.
- GE ZEW Survey Econ. Sentiment Sep, out at -18.1 vs -17.0 exp.
- GE ZEW Survey Current Situation Sep, out at 74.4 vs 75.0 exp.
- EC ZEW Survey Econ. Sentiment Sep, out at -20.3 vs -15.0 exp.
- US PPI Aug, out at -1.4% vs -0.3% exp. YoY out at 2.2% vs 3.2% exp.
- US Core PPI Aug, out at 0.2% vs 0.1% exp. YoY out at 2.2% in line with exp.
- US Net long term TIC flows July, out at $19.2B vs $85.0B exp.
- US Total Net TIC flows July, out at $103.8B vs $60.0B exp.
- US NAHB Housing Market Index Sep, out at 20 in line with exp.
- FOMC rate decision Sep 18, out at 4.75% vs 5.00% exp.
- US ABC Consumer Confidence out at -15 vs. -17 prior.
- Australian Westpac Leading Index MoM (Jul) out at 0.2% vs. 1.0% prior.
- BoJ Target Rate out at 0.5% as expected.
- Japanese Coincident Index (Jul F) out at 70% as expected.
- Japanese Leading Economic Index (Jul F) out at 72.7% as expected.
- Japanese Tokyo Dept. Store Sales YoY (Aug) out at 4.5% vs. -3.9% prior.
- Japanese Nationwide Dept. Store Sales YoY (Aug) out at 1.4% vs. -4.5% prior.
O/N Data Heat map: | EU | US | JP | UK | SZ | AU | CA | NZ | NO | SE | FR | | | - | | (-) | + | | | | | | |
Calendar Today's Highlights: | Time (GMT) | Region | Release | Consensus | | 07:15 | SZ | Adjusted Retail Sales YoY (Jul) | 5.3% | | 08:30 | UK | BoE Minutes | | | 11:00 | US | MBA Mortgage Applications | | | 11:00 | CA | CPI MoM/YoY (Aug) | 0.1%/2.1% | | 11:00 | CA | CPI Core MoM/YoY (Aug) | 0.2%/2.3% | | 12:00 | PD | PPI MoM/YoY (Aug) | 0.2%/1.8% | | 12:30 | US | CPI MoM/YoY (Aug) | 0.0%/2.1% | | 12:30 | US | CPI Ex Food & Energy MoM/YoY (Aug) | 0.2%/2.2% | | 12:30 | US | CPI Index NSA (Aug) | 208.000 | | 12:30 | US | Housing Starts (Aug) | 1350K | | 12:30 | US | Building Permits (Aug) | 1348K | | 14:30 | US | API/DOE Inventories | | | 22:45 | NZ | Current Account Balance (2Q) | -3.285B | This and Next Week’s Highlights: | Date | Region | Release | | 20 Sep | AU | HIA New Home Sales, Reserve Bank Bulletin, RBA Foreign Exchange Transactions | | 20 Sep | SZ | Trade Balance, Producer & Import Prices, ZEW Survey Expectations, | | 20 Sep | UK | Retail Sales, Public Finances, Public Sector Net Borrowing, UK CBI September Industrial Trends | | 20 Sep | EC | Construction Output | | 20 Sep | US | Initial Jobless Claims, Continuing Claims, Leading Indicators, EIA Natural Gas Storage Change, Philidelphia Fed | | 20 Sep | NZ | NZ Tax Receipts for July | | 21 Sep | FR | Wages | | 21 Sep | E-Z | Current Account | | 21 Sep | CA | Retail Sales |
What's going on? - FOMC Rate surprisingly cut by 50 bps. Bernanke is now recognizing that the US economy might indeed be negatively affected by the turmoil in credit and money markets.
- In the FOMC Statement: †Today's action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial marketsâ€
- The USD is weakening and analysts are now discussing whether the BoE has †done enough†to prevent the UK economy from the US meltdown scenario.
FX USD TWI down almost a percent. JPY also lower. European currencies strongest. USDCHF needs to break the lows. ![http://www.saxobank.com/__DotNet/Site/Analysis/GetImage.aspx?ResUID=37ab3f56-f79d-4a7f-bceb-fffba9811e05]()
| EUR | USD | JPY | GBP | CHF | AUD | CAD | NZD | NOK | SEK | PLN | | + | - | - | - | + | - | + | | + | + | | FX Trading Strategies | Pair | Supp. | Resis. | Comments | | USDCHF | 1.1795 | 1.1930 | Key level for further downside is at support, where we look to sell the break of 1.1795 offer, targeting 1.1740. Stop bid at 1.1815. On the mid-term, 3-months options could be played as an alternative for a 1.1290 target (Dec-2004 low). | |
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FOREX : Foreign Exchange Market
FOREX is a word play on the term Foreign Exchange Market. It is a market for buying and selling of currencies from all over the world. Certainly, such transactions are bound to be voluminous. It is just an estimate that there are about transactions of $1.5 trillion USD on a daily basis in the FOREX. Now just compare this with the paltry $300 billion USD a day transactions for the US Treasury Bond and the $100 billion a day transactions for the US Stock Exchange.
The FOREX came into existence in 1971 when the fixed currency exchanges were abolished. Currencies no longer had fixed values after that; on the contrary, their rates (mostly taken in comparison with the USD) were fluctuating, and changed on a daily basis. Throughout the seventies and the eighties the FOREX grew steadily, showing more advancement in the later years. The market has stupendously grown from $70 billion USD a day to the staggering amount that it transacts today on a daily basis.
There are actually about five thousand trading institutions in the FOREX. These include international banks, central government banks such as the US Federal Reserve, and commercial companies and brokers for all types of foreign currency exchange. The best thing that shows the unbiased nature of the FOREX market is that it has no fixed headquarters anywhere – it operates primarily from all major cities like New York, Tokyo, London, Hong Kong, Singapore, Paris, Frankfurt, etc. One can even use the telephone or the internet to make the transactions. The major businesses at the FOREX are the buying and selling of products in other countries. Several transactions are also conducted from the currency brokers or traders who stand to make small profits with the daily fluctuations in the market.
Most of the FOREX business is centered on big banks and financial institutions, but it doesn’t mean that the FOREX is inaccessible to small investors. The recent changes in the financial regulations have effectuated this accessibility. Earlier, a minimum transaction size was required to conduct business with the FOREX. But the current rules have made it possible to break large inter-bank units into smaller bits. Each bit is worth as less as $100,000. This makes it possible to each individual investor through loans that are extended for trading, known as leverage. The ratio to control the lots is 100:1. This means, every $1000 USD will allow one to control $100,000 on the FOREX.
The benefits of trading with the FOREX are mentioned below:-
(1) Liquidity of Investments – As the FOREX is a huge market, the funds have a very high degree of liquidity. This is because of the presence of the international banks who provide their bids and carry out a large number of transactions on a daily basis. Therefore, there is always a buyer or seller for any type of currency.
(2) Highest Degree of Accessibility – The FOREX is open 24 hours a day for 5 days a week. Every Monday morning the exchange opens at Australian Standard Time and closes on Friday afternoon at New York time. Greater accessibility is provided because the transactions can be conducted from the person’s home or office.
(3) Open Market – At the FOREX, there are no secrets. All the fluctuations that occur in the market are made accessible to everyone at the same time. There is no insider trading in the FOREX.
(4) No Commission – There is no hassle of paying commission to the brokers in the FOREX. Here the brokers earn by setting up a difference between the buying price and the selling price of a currency, which is known as a spread.
It must be understood by now that for the FOREX to work effectively, the currencies must always be traded in pairs. For instance, the Japanese yen must be traded against the euro. When one kind of currency is sold, there should be another to be bought in its stead.
The profit happens because there is always mobility between the different currencies. Even if there is a miniscule change in the exchange rate, then it could mean substantial changes in the profits due to the large amount of money involved in the transactions. People are thronging to the FOREX and not any other institution due to the trust that they have in it. To add to the advantage, the market is absolutely well-advanced and uses sophisticated software for dealing out its transactions.
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