New Zealand Dollar Killed by RBNZ Rate Decision

The Reserve Bank of New Zealand decided to cut rates by an additional 50bp today to a record low of 2.5 percent, resulting in an instantaneous sell-off in the New Zealand dollar. Perhaps more telling than the rate cut itself was the RBNZ’s statements regarding the health of their economy. RBNZ Governor Alan Bollard announced that there is a real threat to inflation, as “weaker global growth and an unwarranted tightening in financial conditions” may sink the economy into a deflationary spiral. As a whole, Bollard’s comments were more dovish than many had anticipated. He cautioned that the New Zealand economy remains weak with Business and consumer sentiment suffering and employment reduced. This combination of factors may in fact warrant further rate cuts, which nonetheless will remain at low levels into late 2010. Continued monetary easing may be required to pick up the slack where fiscal stimulus left off since the government is planning to cut spending. Bollard even sets the 2.5% target rate as a ceiling for the next year in monetary action. The RBNZ Governor stills holds onto a few shreds of optimism. He is confident that financial markets are showing signs of stabilization and that progress has been made in tending to the banking sector. Even though the New Zealand economy may eventually recover like Bollard mentions, he also said that “it won’t fell like that on the street.” Don’t expect the RBNZ to follow in the footsteps of the Federal Reserve, Bank of England and Bank of Japan by taking interest rates to zero. Bollard made it clear that New Zealand is not a zero interest rate economy..
How Will the Kiwi Trade in Response to the Decision?
The New Zealand dollar completely reversed direction after the announcement of the interest rate decision. After being up by more than 150 pips, the kiwi only manages to hold on to a gain of 40. As an intermediate technical analysis, kiwi dollar faces support at the 0.5486 low placed on April 20th. After that, we have the 50% retracement of early March lows to April highs at 0.5438. In case markets should decide to change their minds and reverse direction, resistance is placed at the 23.6% retracement at 0.5725, followed by the April 6th high of about 0.5982.
Tuesday, February 15, 2011 by Toolib · 0 komentar

Consumer confidence soars in April

NEW YORK – Hopeful signs that the worst may be over for the economy boosted Americans’ moods in April, sending a closely watched barometer of sentiment to the highest level since November.
The New York-based Conference Board said Tuesday that its Consumer Confidence Index rose more than 12 points to 39.2, up from a revised 26.9 in March. The reading marks the highest level since November’s 44.7 and well surpasses economists’ expectations for 29.5.
The consumer confidence survey showed a substantial improvement in consumers’ short-term outlook, including even their assessment of the job picture.
Some encouraging news in areas like retail sales and housing have helped fuel a recent stock rally. A housing index showed Tuesday that home prices dropped sharply in February, but for the first time in 25 months the decline was not a record — another sign the housing crisis could be bottoming. The Dow Jones industrial average rose 17.12 to 8,042.12 by midday as investors set aside worries about spread of swine flu and the viability of banks.
Improvements in the stock market have helped boost shoppers’ moods, said Gary Thayer, chief economist at Wachovia Securities, but major economic problems remain — and that means that confidence could bounce up and down for awhile, he said.
“We can’t say we have seen the bottom of the economy,” he said. “We still have some economic concerns that we have to work through.”
Economists closely monitor consumer sentiment because consumer spending accounts for more than two-thirds of economic activity.
The huge jump in confidence follows a small increase in March, following a freefall in February. Still, the index remains well below year-ago levels of 62.8.
The April gains were fueled by “a significant improvement in the short-term outlook,” Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement.
She added that the index measuring how shoppers feel now, which posted a moderate gain, offered “a sign that conditions have not deteriorated further and may even moderately improve in the second quarter.”
The Present Situation rose slightly to 23.7 from 21.9 last month. The Expectations Index, which measures how shoppers feel about the economy over the next six months, skyrocketed to 49.5 from 30.2 in March.
That sharp increase — which marked the largest jump since a 13-point gain in November 2005 when the economy was recovering from Hurricanes Katrina and Rita — suggests that people believe the economy is nearing a bottom, Franco said. Still, she noted that the index remains well below the level associated with strong economic growth.
“It looks like the worst is behind us, but clearly we are not out of the woods,” said Franco.
With companies continuing to lay off workers, a major fear is that people will cut back their spending even more, and that could plunge the economy further into a downward spiral. Economists expect the unemployment rate — now at 8.5 percent and the highest since late 1983 — will hit 10 percent by the end of the year and keep climbing next year before it starts coming down.
Meanwhile, investors are becoming more unsettled by the possibility of a major swine flu outbreak, which could stall economic recovery — particularly in regions that depend on travel and tourism. Adam York, an economist at Wachovia Securities, said such a development could dampen confidence levels for May, but it’s still early to tell.
The consumer confidence survey showed that those anticipating business conditions will worsen over the next six months declined to 25.3 percent from 37.8 percent, while those expecting conditions to improve increased to 15.6 percent from 9.6 percent in March.
The employment outlook was also considerably less pessimistic. The percentage of consumers anticipating fewer jobs in the months ahead declined to 33.6 percent from 41.6 percent, while those expecting more jobs increased to 13.9 percent from 7.3 percent.
by Toolib · 0 komentar

Dollar Shoots Higher as Fed Grows Less Pessimistic

The Federal Reserve has grown less pessimistic, driving the U.S. dollar higher against all of the major currencies. As we expected, the U.S. central bank did not expand their asset purchase program and left their target interest rate unchanged at 0 – 0.25 percent. It is extremely important that the Fed went out of their way to say that the pace of economic contraction is slowing, consumer spending is stabilizing and that “policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.”
The Fed did not need to make any changes to their statement at this time because only recently have we seen evidence of improvements in economic data. They could have waited another month to be certain that the improvements can be sustained but the fact that they went out of their way to say that they are less pessimistic indicates that they want to downplay the results of the stress tests on banks. There is no question that we are still a long way from a recovery but the downside risks are easing. The labor market remains the Achilles Heel of the U.S. economy and only when companies stop firing will the economy be able to engage in a sustainable recovery.
The FOMC statement is in line with the comments made by Paul Volcker this afternoon. As the current Chair of the President’s Economic Recovery Advisory Board, Volcker has Obama’s ear. He said that the economy is leveling off and more stimulus is not needed. He also believes that none of the major banks will fail and that inflation will not be a threat until two or three years from now. However that does not mean that the risk of weaker economic data is behind us, because even Volcker admitted that there could be more dissatisfactory data. What he is telling us is that we near the end game of monetary and fiscal stimulus and the Fed seems to agree. The Obama Administration has an extended an extravagant amount of stimulus and it will take time for the trillion dollar fix to bear fruit. All we can do now is wait for the U.S. economy to get back on track but in the meantime, the less pessimistic outlook of government officials should translate an overall improvement in risk appetite.
U.S. equities hit 2 month highs on an intraday basis, encouraging currency traders to move out of low yielders and into higher yielding currencies. The market has completely shrugged off this morning’s weak U.S. GDP report and news that more banks may need capital injections based upon the government’s stress tests. No major threat stands in the way of a further improvement in risk appetite which should mean further gains for USD/JPY.
by Toolib · 0 komentar

U.S. jobs data a stress test of its own

NEW YORK (Reuters) – The U.S. government will release the findings on bank stress tests this week, and data expected to show another month of crushing job losses will also test emerging optimism on global economic prospects.
World stock markets have been surging for two months, a rally predicated on the notion that the pace of U.S. economic contraction may be easing, presaging a possible recovery from the first synchronous global recession since World War Two.
The gains also presume that the U.S. banking sector, hit hard by losses in real estate and consumer loans since the credit crisis began, is on its way to receiving enough public and private capital to sustain corporate lending.
Both these assumptions will come under scrutiny in coming days.
While employment is generally seen as a lagging indicator, another bout of severe job cuts could put renewed pressure on housing and consumer spending.
“The pace of decline is slowing down, but we’re not turning up,” said David Wyss, chief economist at Standard & Poor’s. “We’ve gone from the black diamond onto the blue slope, but it’s still down hill.”
The U.S. employment picture, which will become clearer on Friday with the release of the April jobs report, will be a key determinant of whether the export-based economies of Europe and Asia can rebound. Germany, a bellwether for Europe more broadly, will publish data on retail sales and industrial output, offering some hints as to the continent’s own troubles.
Part of getting the economy back into shape is sorting out the mess in the financial sector, and the Treasury has come under some fire for using what some observers see as overly optimistic worst-case scenarios for its stress tests.
Elizabeth Warren, chair of the Congressional Oversight Panel for the Troubled Asset Relief Program, said the Fed and Treasury’s assumptions are “disturbingly close to where we are now.”
Their benchmarks foresee 10.3 percent as a ceiling for the unemployment rate, to be reached sometime next year. However, many economists polled by Reuters believe the jobless rate will reach 10 percent by the first quarter of next year, and some even see it climbing to 11 percent.
CONFUSION REIGNS
Another prevalent criticism of the government’s handling of the banking sector crisis is the ongoing confusion about when and in what form the stress tests will be released. The Treasury has flip-flopped on the issue, first saying it would unveil the results on Monday, only to backtrack, and then hinting they will now come out late next week.
A government source said on Friday the results would be unveiled late in the U.S. trading session on Thursday.
The real issue is determining how much more money taxpayers will have to shell out to bolster capital in those institutions seen as lacking adequate reserves.
A balance will likely be struck between an amount of capital that is large enough to make the tests credible, but not so large as to make it look like the government could be short on resources to grapple with the banks’ problems.
The emerging consensus is somewhere in the vicinity of $200 billion.
“Unless the test results show, in the aggregate, the need for at least $100 billion of capital, a lot of people aren’t going to think the results are credible,” said Douglas Elliott, a former JPMorgan investment banker now with the Brookings Institution. “I can’t imagine officials wanting it to be $300 billion, and it’s not clear they could get the money from Congress.”
The Treasury has said any new capital injections would come from the $700 billion financial rescue fund approved by Congress in October. Officials estimate they have about $134.5 billion they could still tap.
In Europe, investors will also be focused on a European Central Bank policy meeting on Thursday. Some believe policy-makers might follow the U.S. Federal Reserve’s lead and deploy unconventional emergency measures aimed at adding even more liquidity to impaired credit markets, such as direct asset purchases.
Federal Reserve Chairman Ben Bernanke, for his part, will testify before Congress on Tuesday, and could reinforce the Fed’s message that things are getting a bit better.
UNEMPLOYMENT SWELLS
One major stress on the global economy is the mounting toll of a withering U.S. job market, which has cut into export-reliant European and Asian economies and is unlikely to abate any time soon.
The Labor Department’s official jobs report for April is expected to show another 630,000 jobs were lost last month, modestly less than recent readings but still a huge figure. Such an outcome would bring total job losses for this recession to a staggering 5.7 million.
“The employment report will likely be terrible again,” said Lou Crandall, chief economist at Wrightson ICAP in Jersey City, New Jersey.
He also noted that any eventual recovery in gross domestic product, which shrank an annualized 6.1 percent in the first quarter, will likely be meek.
Economists believe over 2 million additional jobs will disappear in coming months, even if there is a second-half rebound. That means that for the broader population, it will still feel like a recession.
“Merely getting growth above the number zero is not enough,” said Crandall.
by Toolib · 0 komentar

What Is Forex Trading?

Forex trading is nothing more than direct access trading of different types of foreign currencies. In the past, foreign exchange trading was mostly limited to large banks and institutional traders. However recent technological advancements have made it so that small traders can also take advantage of the many benefits of forex trading just by using the various online trading platforms to trade.

The currencies of the world are on a floating exchange rate, and they are always traded in pairs. About 85 percent of all daily transactions involve trading of the major currencies. Four major currency pairs are usually used for investment purposes. They are: Euro against US dollar (EUR/USD), US dollar against Japanese yen (USD/JPY), British pound against US dollar (GBP/USD) and US dollar against Swiss franc (USD/CHF).

If you think one currency will appreciate against another, you may exchange that second currency for the first one and be able to "stay" in it. If everything goes as you plan it, eventually you may be able to make the opposite deal in that you may exchange this first currency back for that other and then collect profits from it. As a note bear in mind that no dividends are paid on currencies.

Transactions on the FOREX market are performed by dealers at major banks or FOREX brokerage companies. FOREX is a necessary part of the worldwide market, so when you are sleeping in the comfort of your bed, the dealers in Europe are trading currencies with their Japanese counterparts. Therefore, the FOREX market is active 24 hours a day and dealers at major institutions are working 24/7 in three different shifts. Clients may place take-profit and stop-loss orders with brokers for overnight execution. Price movements on the FOREX market are very smooth and without the gaps that you face almost every morning on the stock market. The daily turnover on the FOREX market is somewhere around $1.2 trillion, so a new investor can enter and exit positions without any problems.

The fact is that the FOREX market never stops; even on September 11, 2001 you could still get your hands on two-side quotes on currencies. The currency market is the largest and oldest financial market in the world. It is also called the foreign exchange market or FX market for short. It is the biggest and most liquid market in the world, and it is traded mostly through the 24 hour-a-day inter-bank currency market.

When you compare them, you will see that the currency futures market is only one per cent as big. Unlike the futures and stock markets, trading currencies is not centered on an exchange. Trading moves from major banking centers of the U.S. to Australia and New Zealand, to the Far East, to Europe and finally back to the U.S. it is truly a full circle trading game. In the past, the forex inter-bank market was not available to small speculators because of the large minimum transaction sizes and strict financial requirements. Banks, major currency dealers and sometimes even very large speculator were the principal dealers. Only they were able to take advantage of the currency market's fantastic liquidity and strong trending nature of many of the world's primary currency exchange rates.

Today, foreign exchange market brokers are able to break down the larger sized inter-bank units, and offer small traders like you and me the opportunity to buy or sell any number of these smaller units. These brokers give any size trader, including individual speculators or smaller companies, the option to trade at the same rates and price movements as the big players who once dominated the market.
Sunday, February 13, 2011 by Toolib · 0 komentar

Investing in Forex

Investing in foreign currencies is a relatively new avenue of investing. There are considerably fewer people are aware of this market than there are people aware of several other avenues of investing. Trading foreign currency, also known as forex, is the most lucrative investment market that exists. There are several factors that make this true among which, successful forex traders earn realistic profits of one hundred plus percent each month. Compared to some of the better known investment markets such as corporate stocks, this is an unheard of return on investment. It's very necessary to mention here that a person who invests in forex must, without exception, make it a point to learn the detailed, but simple strategies and information surrounding the market. This very fact is what makes the difference between successful forex traders and other traders.

A few additional points, which create such powerful leverage for investors within the forex market are: The amount of capital required to begin investing in the market is only three hundred dollars. For the most part, any other investment market is going to demand thousands of dollars of the investor in the beginning. Also, the market offers opportunities to profit regardless what the direction of the market may be; In most commonly known markets investors sit and wait for the market to begin an up trend before entering a trade. Even then, investors, as a rule must sit and wait some more to be able to exit the trade with a nice profit. Given that the forex market produces several up, down, and sideways trends in a single day, it can easily be seen that forex stands head and shoulders above other markets. Additionally there are trading strategies, which are taught that provide for compounded profits; these are profits on top of profits. In addition, free demo accounts are available within the industry of forex trading, which facilitate the sharpening of skills without the risk losing any capital. And the advantage regarding the time factor in trading foreign currency is a very attractive point for any investor. Compared to one of the most sought after avenues of investing, which often requires forty or more hours each week, namely in the real-estate market, the forex market requires a much smaller demand on the investor's time. Forex trading requires approximately ten to fifteen hours each week to earn a full time income. It's easy to see that the advantages and great leverage that exist in the forex market, make it among the most lucrative, time liberating, and easy to enter by far.

I hope this information gives you a clear understanding of how you can turn your investing into a true method of making your money work harder for you.
by Toolib · 1 komentar

Advantages of the Forex Market

What are the advantages of the Forex Market over other types of investments?

When thinking about various investments, there is one investment vehicle that comes to mind. The Forex or Foreign Currency Market has many advantages over other types of investments. The Forex market is open 24 hrs a day, unlike the regular stock markets. Most investments require a substantial amount of capital before you can take advantage of an investment opportunity. To trade Forex, you only need a small amount of capital. Anyone can enter the market with as little as $300 USD to trade a "mini account", which allows you to trade lots of 10,000 units. One lot of 10,000 units of currency is equal to 1 contract. Each "pip" or move up or down in the currency pair is worth a $1 gain or loss, depending on which side of the market you are on. A standard account gives you control over 100,000 units of currency and a pip is worth $10.

The Forex market is also very liquid. When trading Forex you have full control of your capital.

Many other types of investments require holding your money up for long periods of time. This is a disadvantage because if you need to use the capital it can be difficult to access to it without taking a huge loss. Also, with a small amount of money, you can control

Forex traders can be profitable in bullish or bearish market conditions. Stock market traders need stock prices to rise in order to take a profit. Forex traders can make a profit during up trends and downtrends. Forex Trading can be risky, but with having the ability to have a good system to follow, good money management skills, and possessing self discipline, Forex trading can be a relatively low risk investment.

The Forex market can be traded anytime, anywhere. As long as you have access to a computer, you have the ability to trade the Forex market. An important thing to remember is before jumping into trading currencies, is it wise to practice with "paper money", or "fake money." Most brokers have demo accounts where you can download their trading station and practice real time with fake money. While this is no guarantee of your performance with real money, practicing can give you a huge advantage to become better prepared when you trade with your real, hard earned money. There are also many Forex courses on the internet, just be careful when choosing which ones to purchase.
by Toolib · 0 komentar
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