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Monday, 31 December 2018

A euro curse? European banking stocks' lost decades


Fearing his country’s pay-as-you-go pension scheme is unsustainable, a 40-year old French engineer - let’s call him Jean Dupont - makes a New Year resolution.

Hoping the introduction of the euro the next day will mark a new era of prosperity for the European economy, Dupont decides to invest in the bloc’s banking sector every single trading day for the next two decades.


His strategy is simple: buying and holding on what he believes is the best proxy to play the region’s dynamic economy.

And why not? Europe is expanding at its fastest rate in about 10 years, Germany has turned its economy around since reunification in 1990 and, with more than 10 Eastern and Central European countries queuing up to join the EU, there seems to be no shortage of growth on the horizon.

Moreover, a dot-com boom is fuelling belief in a promising IT-based “new economy”.

What could possibly go wrong?

Paris, December 31, 2018:

Now 60, Dupont must come to terms with the fact that his investment strategy has misfired horribly.

Excluding dividends, he finds that he has lost money on his 20 years of daily investments in the euro zone banking sector a staggering 98.5 percent of the time.

Only about 1.5 percent of his investments were made at a lower level than the index’s close on Dec. 28, 2018.

He is not sure who to blame.

The great financial crisis of 2008 seems a credible culprit.

But his American cousin Jonathan Bridges, who 20 years ago followed a parallel strategy of daily investments in the U.S. banking index, has had a success rate of about 50 percent.

Italy opposition protests outside parliament against government budget
That’s even though the subprime loans that were a major factor in the crisis were centred on the United States.

Dupont might also look for clues in the euro zone economy’s sluggish growth rate, the sovereign debt crisis of 2011 or ultra-low, and at times negative, interest rates.

But none of that can fully explain to him why the bloc’s banking index has lost about two-thirds of its value over 20 years.

If he wasn’t such a rational man, he’d almost think the euro was cursed.

Reference: Reuters


Stocks pin hopes on Sino-U.S. talk, as year ends deep in the red


SYDNEY (Reuters) - Asian stocks rose on Monday as hints of progress on the Sino-U.S. trade standoff provided a rare glimmer of optimism in what has been a rough year-end for equities globally.

Survey data out of China, however, proved unhelpfully mixed with manufacturing activity contracting for the first time in two years even as the service sector improved.

Sentiment had brightened just a touch when U.S. President Donald Trump said he held a “very good call” with China’s President Xi Jinping on Saturday to discuss trade and claimed “big progress” was being made.

Chinese state media were more reserved, saying Xi hoped the negotiating teams could meet each other half way and reach an agreement that was mutually beneficial.

The Wall Street Journal reported the White House was pressing China for more details of on how it might boost U.S. exports and loosen regulations that stifle U.S. firms there.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 0.6 percent, but were still down 16 percent for the year.

E-Mini futures for the S&P 500 ESc1 firmed 0.7 percent. Spreadbetters pointed to a positive start for Europe with London’s FTSE futures up 0.4 percent.


Japan's Nikkei .N225 was closed for a holiday having ended the year with a loss of 12 percent.

Across the region, the worst performer of the year was the index of Chinese blue chips .CSI300, which lost a quarter of its value. The only major market in the black for the year was India, where the BSE .BSESN was ahead by almost 6 percent.

The story was much the same across the globe, with the vast majority of the major stock indices in the red.

The S&P 500 .SPX is off almost 10 percent for December, its worst month since February 2009. That left it down 15 percent for the quarter and 7 percent for the year.

“Simply looking at the markets would suggest that the global economy is headed into recession,” said Robert Michele, chief investment officer and head of fixed income at J.P. Morgan Asset Management.

“However, while we agree the global economy is in a growth slowdown, we don’t see an impending recession,” he added, in part because the Federal Reserve could provide a policy cushion.

“Already, commentary out of the Fed suggests that it is nearing the end of a three-year journey to normalise policy,” argued Michele.


NO MORE HIKES
Indeed, Fed fund futures have largely priced out any hike for next year and now imply a quarter point cut by mid-2020.

The Treasury market clearly thinks the Fed is done on hikes, with yields on two-year paper having fallen to just 2.52 percent from a peak of 2.977 percent in November.

The $15.5 trillion market is heading for its biggest monthly rally in 2-1/2 years, according to an index compiled by Bloomberg and Barclays.

The precipitous drop in yields has undermined the U.S. dollar in recent weeks. Against a basket of currencies .DXY, it was on track to end December with a loss of 0.8 percent but was still up on the year as a whole.

It has also had a tough month against the yen with a loss of 2.8 percent this month, and was last trading at 110.36 JPY=. However, 2018 was a pretty stable year for the pair given it spent all of it in a narrow trading range of 104.55 to 114.54.

The euro is on track to end the month on a weaker note at $1.1425 EUR=, nursing losses of almost 5 percent over the year to date.

That was trivial compared with the hit oil prices have taken in the last couple of months, with Brent down almost 40 percent since its peak in October.

Italy opposition protests outside parliament against government budget
The crude benchmark was last up 59 cents at $53.80 a barrel but down 20 percent for the year. U.S. crude futures nudged up 48 cents to $45.81.

Gold was ending the year on a high note after rallying almost 5 percent in the past month to stand at $1,278.57 an ounce XAU=.

Reference: Wayne Cole

Saturday, 29 December 2018

UK crime agency examining leaks in insider trading investigation - WSJ


(Reuters) - The UK National Crime Agency (NCA) is examining accusations that an employee leaked information to a suspect for money, undermining a probe into a network of insider trading suspects in Europe, the Wall Street Journal reported on Thursday.

The NCA, which usually focuses on tackling serious and organised crime, is investigating whether a government translator with access to wiretap recordings tipped off the target of an insider-trading investigation, the Journal reported, citing people familiar with the matter.

Britain’s markets watchdog, the Financial Conduct Authority (FCA), declined to comment, citing reporting restrictions.


The NCA did not immediately reply to Reuters’ requests for comment, sent outside of business hours. An NCA spokesman told the WSJ that the agency does not routinely confirm or deny the existence of investigations.

The allegations stem from an investigation started in 2013, which included monitoring a network of people suspected of using illegal tips to trade stocks, the report said, citing sources. The investigation has led to at least one prosecution.

The report cited a letter suggesting there was a joint investigation by the NCA and FCA into trading activities of the suspects. One of the suspects had “three people working for him at the agency”, according to the letter cited by the Journal, referring to the NCA.


Another suspect said the accused traders could pay off NCA officers assigned to the case by sending money to a bank account in Macau, according to the report.

Neither the name of the translator nor the exact time of the leaks could be learnt by the Journal.

Reporting by Kanishka Singh

Friday, 28 December 2018

Safe-havens yen and the Swiss franc rise on global growth concerns


SINGAPORE (Reuters) - The yen and the Swiss franc rose on Friday, as investors sought shelter in safe-haven assets due to renewed U.S.-China trade tensions and weaker-than-expected data in those two economies that revived global growth fears.

Reuters reported on Thursday that the Trump administration was considering an executive order in the new year to declare a national emergency that would bar U.S. companies from using products made by Chinese firms Huawei Technologies and ZTE.

“With the end of 90-day tariff moratorium looming ominously on the horizon, this announcement is yet another bump in the rocky path to a trade resolution,” said Stephen Innes, head of Asian trading at Oanda in a note.

Trade tension between the world’s two largest economies has been one of this year’s biggest risk factors, though Washington and Beijing on Dec. 1 agreed to a 90-day ceasefire in their tariff dispute while they try to negotiate a durable deal.


Markets remain sceptical whether the two sides can bridge their differences, which go beyond trade to intellectual property rights and other issues.

In Asian trade on Friday, the yen added 0.4 percent against the dollar, while the Swiss franc tacked on 0.3 percent as renewed growth fears pushed investors back into safe havens.

The anxiety in markets has helped these currencies this month put on 2.3 percent and 1.2 percent, respectively.

Currencies generally are trading in thin volumes, with year-end positioning adding to volatility.


The dollar index, a gauge of its value versus six major peers, fell by around 0.15 percent to 96.34, after losing 0.5 percent overnight.

Data showing consumer confidence at its weakest in more than three years in the United States, as well as an unexpected drop in industrial profits in China, provided a stark reminder to investors of the deteriorating global growth outlook.

That came just a day after a dramatic surge on Wall Street had given some respite to battered investor sentiment. Overnight, U.S. stocks ended higher in a volatile session.

In December, the Federal Reserve raised rates for the fourth time this year and it forecast two more rate hikes in 2019.

Financial markets are expecting U.S. growth to slow next year as the spillover effects from rising interest rates hit corporate profits and economic activity.

For this reason, the interest rate futures market is barely pricing in just one more hike in 2019 as many traders expect the Fed to pause on its monetary tightening path if economic data weakens in coming quarters.

“There are intensifying headwinds facing the US economy in 2019 – namely the lagged effects of higher borrowing costs, the stronger dollar, the fading support from the fiscal stimulus and weaker external demand at a time of rising trade protectionism,” said James Knightley, chief international economist at ING in a note.

“These factors will increasingly weigh on sentiment in 2019,” he said.

Oil prices have tumbled in recent months, which has kept commodity currencies such as the Canadian dollar under heavy pressure. The loonie changed hands at C$1.3620 and has lost 7.5 percent of its value versus the U.S. dollar this year.

Some analysts expect the Canadian dollar to strengthen if oil prices rebound in the new year.

Global stocks wobble after market rout
“The Canadian dollar was the only currency that failed to benefit at year-end because of oil but as crude prices stabilize, so will the loonie,” said Kathy Lien, managing director of currency strategy at BK Asset Management in a note.

The euro gained 0.2 percent, fetching $1.1452. But the single currency has struggled this year due to weak euro zone data, low inflation and political risks. That has led to the European Central Bank maintaining ultra-low interest rates. The euro is on track for a loss of 4.5 percent versus the greenback this year.

Reporting by Vatsal Srivastava

Asia stocks advance after Wall Street's recovery continues


TOKYO (Reuters) - Asia stocks advanced on Friday after Wall Street ended volatile trade in positive territory, adding to the previous session’s big gains, although lingering investor jitters helped support safe-haven currencies such as the yen.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.8 percent. It has fallen 3 percent so far in December.

The Shanghai Composite Index .SSEC moved up 0.35 percent.

Australian stocks added 1 percent and South Korea's KOSPI .KS11 climbed 0.5 percent. Japan's Nikkei .N225 bucked the trend and slipped 0.3 percent, losing some steam after surging nearly 4 percent on Thursday.

U.S. stocks roared back to end in positive territory on Thursday, with the Dow .DJI adding 1.14 percent, after suffering steep losses for much of the session.

The gains come a day after Wall Street indexes posted their biggest daily percentage increases in nearly a decade following a sharp plunge at the week’s start.

However, all three U.S. major indexes remain down more than 9 percent for December following losses earlier in the month, when factors including concerns over the U.S.-China trade war, slowing global growth and wariness towards the Federal Reserve’s tightening cycle took a heavy toll.


“Selling pressure on U.S. equities is beginning to dissipate, but the VIX index is still around 29 with investor risk sentiment still recovering. A renewed market slide remains a risk,” said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

The CBOE Volatility Index .VIX rose midweek to 36, its highest level since early February. It has since pulled back below 30 but remains well above a recent low of 15 at the beginning of December.

Focus turned to the Fed’s stance and whether the equity markets can sustain their recovery at the start of the new year.

“If Fed officials - notably Chairman (Jerome) Powell and New York Fed Governor Williams - show a cautious stance towards further rate hikes given recent instability in the stocks markets, that would lead to a rise in U.S. equities and Treasury yields, and a firmer dollar,” said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

Fed Chairman Powell is due to give a speech on Jan. 4.

While stocks showed signs of recovery, lingering market volatility helped keep safe-haven currencies such as the yen and Swiss franc in demand.

The dollar extended overnight losses and was down 0.3 percent at 110.64 yen JPY=. It was on track to lose more than 2 percent this month.


The greenback declined 0.3 percent to 0.9851 francs per dollar CHF= after slumping more than 0.8 percent the previous day. The U.S. currency has fallen 1.1 percent against its Swiss peer on the month.

The euro was a shade higher at $1.1450 EUR= after gaining 0.7 percent overnight. The common currency was headed for a 1 percent gain in December.

The 10-year U.S. Treasury note yield was up 3 basis points at 2.773 percent, pulling back from a nine-month low of 2.720 percent brushed earlier in the week.

The yield had climbed to a seven-year peak of 3.26 percent in October when the debt market had braced for potentially faster pace of Fed rate hikes in 2019.

Oil prices remained choppy, with U.S. crude futures up 2.2 percent at $45.60 per barrel after sliding 3.5 percent the previous day.

U.S. crude had rallied 8 percent midweek after dropping to a 1-1/2-year low of $42.36 at the week’s start.

Crude has lost more than one-third of its value since the beginning of October and is heading for declines of more than 20 percent in 2018.

In addition to oversupply concerns, worries about slowing global economic growth have dampened investor demand for riskier asset classes and pressured crude.

Global stocks wobble after market rout
Brent crude climbed 1.8 percent to $53.11 per barrel after losing more than 4 percent the previous day.

Spot gold XAU=, which has benefited this week from the global market turmoil was slightly higher at $1,278.71 an ounce following an ascent to a six-month high of $1,279.06 on Wednesday.

Reference: Shinichi Saoshiro

Thursday, 27 December 2018

Dollar holds most of its gains after Wall Street rally pushes yields higher


SINGAPORE (Reuters) - The dollar retained most of its overnight gains on Thursday but was off its peak for the week so far amid thin volumes, as signs of easing trade tensions and strong U.S. economic data sent Wall Street stocks and Treasury yields higher.

In a sharp bounce from bear market territory, the Dow Jones Industrial Average rocketed more than 1,000 points for the first time on Wednesday, while U.S. 10-year yields rallied around 8 basis points to end at 2.8 percent.

The swing higher in bond yields supported the greenback, which has been under pressure over the past couple of weeks following a decline in yields, which was driven by heightened concerns about slowing economic growth, and - more recently - a partial U.S. government shutdown.

Investors on Wednesday were quick to latch on to media reports that a U.S. trade team will travel to Beijing the week of Jan. 7 to hold talks with Chinese officials.


Markets also lapped up data showing U.S. 2018 holiday sales rose 5.1 percent from a year ago to over $850 billion, the strongest gain in six years.

“Investors are coming back to the U.S. markets after a build-up of lot of fearmongering..this would be supportive of the dollar as well as treasury yields and stocks,” said Stephen Innes, head of Asian trading at Oanda.

“Trade war risk is abating somewhat..so risk-on sentiment should also be supportive of emerging market currencies,” added Innes.

The dollar index, a gauge of its value versus six major peers, slipped 0.2 percent in Asian trade, after gaining 0.5 percent on Wednesday.


The U.S. currency lost about 0.3 percent versus the yen, fetching 111 at 0253 GMT after bouncing 1 percent overnight and breaking a safe-haven driven 8-day stretch of gains for the Japanese currency.

“If risk sentiment keeps improving and Dow futures extend their gains in the Asia session, I would expect dollar/yen to move higher still,” Innes said, though he warned that it was too early call a turn in risk sentiment.

Another factor lifting market sentiment was easing tensions between the White House and the U.S. central bank. White House economic adviser Kevin Hassett said that Fed Chairman Jerome Powell’s job was “100 percent” safe.

Last week, the Federal Reserve raised rates for the fourth time this year, and largely kept to its plans to hike rates next year despite heightened economic risks which prompted U.S. President Donald Trump to step up his criticism of Fed Chairman Jerome Powell.

Trump blasted the Fed on Monday, describing it as the “only problem” for the U.S. economy and stoked speculation he might fire Mr. Powell, whom he picked for the top Fed job last year.

Global stocks wobble after market rout
The euro fetched $1.1375, strengthening around 0.25 percent. The single currency is set to end the year lower by 5 percent as weak economic fundamentals in Europe, political tensions in France and Italy and a dovish European Central Bank had made investors favour the dollar over the euro in 2018.

Sterling, which has been battered by Brexit woes in recent months, was firmer at $1.2659, having lost 0.4 percent the previous session.

The Australian dollar, often considered a gauge of global risk appetite, was steady at $0.7056, but off its intra-day high.

Reporting by Vatsal Srivastava

Wall Street surge brings relief to battered equity markets


TOKYO (Reuters) - Asian shares on Thursday rode a dramatic surge on Wall Street as markets, battered by a recent drum roll of deepening political and economic gloom, cheered upbeat U.S. data and the Trump administration’s effort to shore up investor confidence.

In a buying frenzy as spectacular as the recent rout, U.S. stocks soared with the Dow Jones Industrial Average rocketing more than 1,000 points for the first time on Wednesday.

That helped push MSCI’s broadest index of Asia-Pacific shares outside Japan up 0.6 percent and away from eight-week lows.

European shares are set to open higher as markets reopen after the Christmas break, with early indications from London’s FTSE and Frankfurt’s DAX pointing to gains of 0.6 to 0.7 percent.

E-Mini futures for the S&P 500 were last down 0.5 percent.

Japan’s Nikkei managed to pull out of bear market territory it had entered on Tuesday, closing 3.9 percent higher, while Australian shares jumped 1.9 percent.

Chinese shares did not join Asia’s rebound. The blue-chip index was down 0.4 percent, as was Hong Kong’s Hang Seng index.

There was no single trigger for the overnight relief rally on Wall Street, though a Mastercard Inc report that sales during the U.S. holiday shopping season rose the most in six years in 2018 helped allay concerns about the health of the U.S. economy.


There were also some attempts by the White House to temper its broadside against the Federal Reserve. Kevin Hassett, chairman of the White House Council of Economic Advisers, said on Wednesday that Fed Chairman Jerome Powell’s job was not in jeopardy.

His comments came days after President Donald Trump described the Fed as the “only problem” in the U.S. economy after the central bank last week raised rates for the fourth time this year, and retained plans for more hikes in 2019.

A U.S. government shutdown, concerns over slower global growth and U.S. Treasury Secretary Steven Mnuchin convening a crisis group following the sharp sell-off in equities have also rattled investors.

“There is a question which is starting to unfold, whether this is a bear market rally or whether this is something more sustainable,” said Chris Weston, Melbourne-based head of research at foreign exchange brokerage Pepperstone.

“We probably got another 3 to 5 percent in these market rallies before we see people looking to fade into this.”

Faced with deepening gloom, investors were quick to lap up media reports that a U.S. trade team will travel to Beijing the week of Jan. 7 to hold talks with Chinese officials.

“I think worries regarding the U.S. government shutdown as well as lack of clarity over whether the U.S.-Sino negotiations (over trade) will go well or not still remain,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

Reuters reported on Thursday that the Trump administration is considering an executive order in the new year to declare a national emergency that would bar U.S. companies from using Huawei and ZTE products.

Not all signs were positive overnight, with the Fed’s Bank of Richmond’s manufacturing index giving investors a reminder of the underlying global risks. The index fell the most on record, Refinitiv data going back to 1994 showed.

The weak figures rekindled fears that Sino-U.S. trade tensions are weighing on U.S. producers, and came days before the release of the Chicago purchasing managers index at the end of the week.

Wall Street rebounds after punishing selloff
OIL IN THE SPOTLIGHT
Oil also caught investors’ attention after U.S. crude and Brent overnight both marked their largest single-day rises since late November 2016.

U.S. crude on Wednesday rallied almost 8.7 percent, while Brent jumped more than 8.8 percent in a partial rebound from steep losses that pushed crude benchmarks to lows not seen since last year.

U.S. crude was last trading 0.4 percent lower at $46.06 a barrel, while Brent gave up 0.3 percent at $54.30 a barrel.

“If we can see oil prices moving up in the low end of the range, which is around $49 to $50, then we’ll continue to see equities moving higher,” said Pepperstone’s Weston.

As investors moved back into riskier assets overnight, 10-year U.S. Treasury yields rose and last stood at 2.786 percent, about 6.5 basis point off their lowest since April hit in Asian trading on Wednesday.

The dollar gave up some of its overnight gains, but the losses were limited.

Against the yen, a perceived safe haven, the dollar was last off 0.3 percent at 111.08 yen. It had risen nearly 1 percent overnight, booking its largest single-day gain against the yen since late April.

The greenback was also on the back foot against the euro and the British pound, losing about 0.2 percent against both currencies, to $1.1386 and $1.2658, respectively.

Against a basket of currencies, the dollar was down 0.2 percent at 96.826.

In commodity markets, gold remained below a six-month peak hit during the previous session. Spot gold was flat at $1,268.00, as earlier gains were shed as investors ventured back into riskier assets.

Reporting by Daniel Leussink

Wednesday, 26 December 2018

3 Ways Forex Brokers Play Games on You

An Educational Article

3 Ways Forex Brokers Play Games on You


Although, Forex brokers are supposed to work with you and help you to be successful in the Forex market, some unscrupulous brokers try to play games on you. 

Here are some of the ways in which the brokers play games on you:
Marking Up the PIP
Forex brokers are supposed to transfer orders to the banks and then get commissions for every order that they transfer. Commissions are the only way in which the brokers earn money. There are some brokers who add an extra PIP to the spread. For example, if the spread for EUR/USD is 1 PIP, the broker adds another 1 PIP making it a total of 2 PIPs. This means that the broker not only makes money from the commissions, he/she also makes money from the extra PIPs.

To avoid such a broker you need to do your research. The best way of doing it is comparing the broker's spread with the regular spread. If the broker's spread is above the regular spread by 1-3 PIPs, chances are that the broker is marking up the spread.

Slippage
This is where the brokers increase the price of the currencies when you are about to open a trade. They do this in order to prevent you from making a huge profit. When you are about to buy a given currency, the price automatically rises so that you end up buying at a slightly higher price than the one indicated on the chart.

It's very easy to know that this is happening as you only need to compare the price that you have bought the currency and the one that you intended to buy at. If there is a discrepancy between the two, the broker is most likely playing games on you. To be on the safe side you should close your account as fast as you can.

Re-Quoting
Here the broker will delay for a little bit before you are allowed to make a trade. For example, if the price is going up strongly and you want to buy a currency, the broker will delay for a few seconds and wait for the price to go higher so that you can buy the currency at a higher price. The same thing happens when the price of the currency is going down-the broker will wait for a few seconds for it to go lower.
Many brokers do this 100% intentionally and aim at reducing your chances of making good profits.

Understanding a Forex Broker
A Forex broker is a person who acts as an intermediary between you and the interbank. The interbank is a network of banks that trade with each other. Forex brokers have relationships with the banks; therefore, when you approach a given broker, he/she will advise you on the best currency to trade.

Forex Trading Account
For you to start working with a Forex broker you need to open a Forex trading account. This is an account that is synonymous to a bank account. You need to make a deposit in your account and fill in some papers. Almost all brokers provide you with a free demo account where you practice how to trade. While there are some brokers who ask you to make a deposit in order to access the demo account, others don't require you to make a deposit. 

You should always do your research and find the brokers that don't require you to make a deposit.

Leverage
In addition to providing you with a demo account, Forex brokers also provide you with leverage. This is a feature that allows you to trade using large amounts of money than you have in your account. Although, this feature allows you to trade using higher amounts of money than you already have thus make more profits, it's usually risky as you can easily lose a lot of money if the market goes against you. Many brokers provide information about their leverage in fine print; therefore, you should carefully read the document given to you by the broker.

How to Hire a Forex Broker

For you to hire the right Forex broker you need to consider a number of factors. Some of these factors include:
Popularity: a good Forex broker is popular among Forex traders. You should do your research and find some of the popular brokers. Many people go for new, less-popular brokers as they are cheap. If you want to learn a lot and secure your investment, you should go for an experienced broker. Although, the broker will be more expensive, he/she will be worth your money.

Trading platform: since you will be trading using the broker's platform, you need to ensure that you are able to easily use the platform. You should also ensure that the platform has all the necessary tools to help you make the right trading decision. As rule of thumb you should ensure that the platform provides you with a trading calendar and charts. 

It should also provide you with trading indicators.

Reference: Majed Mohson

Tuesday, 25 December 2018

Forex Profit Signals

An Educational Article


Forex Trading is trading currencies from different countries against each other. Forex is an inter-bank market that took shape in 1971 when global trade shifted from fixed exchange rates to floating ones. This is a set of transactions among Forex market agents involving exchange of specified sums of money in a currency unit of any given nation for currency of another nation at an agreed rate as of any specified date. During exchange, the exchange rate of one currency to another currency is determined simply: by supply and demand - exchange to which both parties agree. Actually, Forex is the financial game between BULLS and BEARS.

The Major currencies pairs are:
EUR/USD 
GBP/USD 
USD/JPY 
USD/CHF 
USD/CAD 
AUD/USD

And these are the 6 best Forex Markets.

What are Forex Signals?
Forex signals are indicators that let you know when it's a good time to buy or sell a currency pair. They provide you with insight as to what's going on in the Forex market without the necessity to monitor Forex trends throughout the day. If you are self-employed or employed by another company, Forex trading is likely a part-time endeavor for you. 

You won't have time to sit at the computer and monitor the Forex market all day. Forex signals can be delivered to you throughout the day by professional Forex traders to give you a heads-up on what's going on in the market. You can receive the signals, and then place the signals for buy or sell.

Forex signals are basically "suggested" buy and sell points with price targets and stop-loss levels delivered by FX signal providers to traders. They may be delivered by email, instant messenger, cellphone, live currency trading systems or direct to your Forex signal metatrader on your desktop.

Forex trading is a risky business and it takes some time to master the art of Forex trading signals. There are a number of FX signal providers but before you choose, you need to make sure you have done your homework. Always ask for the Free signals to deliver for 3 to 5 days and test those signals in your Demo Account.

The main characteristics of Forex trading signals to be aware of are as follows;
Cost: monthly subscription 
Complexity: Simple "one email a day" OR Full-Service 
Control: You keep full control OR the signal provider trades your account for you.
Most Forex trade signals charge a very modest subscription fee, usually in the region of USD $80 - $400 per month.

If you're new to Forex trading, you probably realize how important it is to make the right trading decisions. One wrong trading move can drastically harm your portfolio while a good move can bring tremendous profits. That's why trading signals are so important. Once you've tried a Forex demo account for practice and created a strategy that works for you, you can add trading signal services as a useful tool in your Forex trading.
With online Forex, finding a trading signal service is easier than ever.

In their simplest form a Forex trading signal will send you a Forex alert email once a day listing trade set ups for the next 24 hours.

Some Forex signal providers offer a free trial service, thus allowing currency traders to sample the signals to assess their worth. This is a helpful step, as it allows the trader to consider the quality and reliability of the signals before paying money. This is a crucial element in the research process, and weeds out the providers who want money upfront as they are not confident in their ability to call profitable trades. This is a good service that you can try for free for 3 to 5 days.

Various FX signal providers offer a few complimentary services along with the featured ones. Look for a FX signal company that provides email support, phone assistance and even mentoring to their clients. This is of great value, especially to new traders.
They assign their time assisting traders in taking buy/sell decisions. Forex traders depend upon and trust the recommendations of these professional signal providers, while making investing decision in the Forex market

Forex signals are not meant to be a magic solution to all your Forex problems. They are designed to inform you about the market.

Forex business timing is extremely crucial; a trader can earn millions or lose even more depending upon the his timely or untimely actions. Besides, being the biggest market on the face of earth - it generates business activity of almost 3 trillion USD, it operates around the clock, all over the globe, making it thus impossible for a trader to stay vigilant all the time about market fluctuation and probable changes therein.

Therefore, a trader needs alarms and indicators to get knowledge about the possible opportunities and probable pitch points. Hence the need for Forex signal or alerts. Basically Forex alert or signal is a communication or intimation to the trader indicating the ripe time to buy/sell and the suitable price to pay/ask. Most of the time, such signals and alerts are provided by trained professionals, either individual or companies.

When choosing a Forex signal service, be sure the company offers the type of signal alerts you need. Every person is different. Some require computer or email alerts, while others are not accurate Forex signals are made for both professional traders and although new traders. 

The best Forex signals trading system is going to cover multiple situations on the Forex market. For instance, the best Forex trade signals is going to cover all major currencies like GBP, USD, and EUR at all times the market is open, not only for specific situation. Simply to get the full value of your Forex trade you must know what is happening in regards to all the major currencies. The Forex system should also be able to give you at least 1-3 Forex trading signal alerts a day.

Some Forex trading signals are high volume scalpers, calling many trades in a day aiming to profit a handful of pips on each. Others only call a few trades a day, aiming to profit 20 - 80 pips on each single trade.
 
Forex trading signal providers help you in minimizing risks or losses in trading.
Forex signals are generally given on a daily updated basis and all are contingent on factual market analysis and behavioral flow and not on mere hearsay and other speculations.

The signals are calculated and generated by using different indicators such as trends, moving average, Elliott waves, Bollinger bands, Fibonacci series, etc. In spite of that, some uses strategies like:
Pip Maximizer Method 1 
Pip Maximizer Method 2 
Pip Reversal Method 
Pip Divergence Method 
Instant Pip Method 
Pip Retracement Method 
Quantum Pip Strategy

The following question I wish to raise, is the abundant selection of Forex signals from which we can choose. Because of the variety of service providers, they offer different services, of which we must be aware. The first type of Forex signal provider will just send out trade alerts by email, often daily, sometimes at several intervals throughout the day. Thus you need to have a laptop of email receiving device ready at all times, to gain the most from trading Forex signals.

The next type to consider are through EA/Expert Advisors. These types of signals are not ideal because those are the computer oriented programs which can ruin your money within a few trades. But fortunately this is not such a big problem today, as more traders have email reading devices. 

The most crucial aspect concerning the format you receive the signals, is to ensure that you receive them immediately, and have the capability to act on them straight away - so you have to have immediate access to your Forex brokerage account, and place the trade as soon as you humanly can.

A unique benefit of trading Forex signals is that it gives guidance and discipline in a Forex currency trader. Forex profit signals service providers send you alerts when the conditions are right for the trade. They use cutting-edge technology which constantly monitor all major currency pairs for generating technical indicators.

Forex signal generators produce Forex signals which are indicators of ideal trading opportunities. These are certain algorithmic patterns which have been evident in successful Forex trades throughout the years. These Forex signals are then fed onto the program of Forex automated EA or Expert Advisors. 

This program will then either make Forex trading decisions for the individual while s/he is away from the computer or advice the individual about what to do. Forex EAs act like wizards which monitor currency ratings through online Forex Trading Platforms. One can look at Forex signals as triggers of commands which allow the automated system to function.

Forex signals can immeasurably add to the profits of a Forex trader.
How to Receive Forex Signals: 
Forex signal services are available to provide signals to you around the clock. These services usually have professional Forex traders who monitor the market 24/7 and provide you with up-to-date information. These services often charge a monthly or yearly subscription fee for their services. The methods used to deliver the Forex signals to you can vary from one service to the next. 

Signals can be sent through email alerts, to your phone or cell phone, through your pager, or even through a pop-up software system that will show a screen on your computer each time a signal is sent. The services also vary in how they present information to you. Some will provide live charts to give you more insight as to what is happening in the market.

Time frame for which the Forex trading signals are generated is equally important. Few trading signals can be valid only for a few minutes or an hour; others may have recommendations that are valid for a day or more. If the Forex trading signal providers generate signals for shorter time frame, you need to monitor the market frequently.
Some Forex signal service providers offer add-on services like email or mobile alerts. The service provider should have end-to-end technical support for the customers.

Even with experienced traders calling your trades, it's prudent risk management to never ever risk more than 3% of your initial capital on any one trade, preferably only 1%. So, if for example your initial capital, (or to put it another way, the maximum you can afford to lose) is let's say 5,000, the position size you take on each trade should be such that if the trade hit your stop loss, your maximum loss would be no more than 1% x 5,000 = 50.

Forex signal providers render Forex business quite a bit easy for traders, especially those who are relatively new in the business. Forex signal generation and provision can be either manual or automated and it provides entry/exit points of the trade streak for major or already chosen currency pairs. 

In a manual signal generation system, a simple trade signal is provided by the single provider. In automated signal generation system, the Forex system not only intimates and alerts the trade to either enter or exit the trade, but sometimes makes the deal by operating in synchronization with the trader's bank or broker.

Initially Forex signals and alerts used to come in the form of telephone calls and facsimiles. Now as we have stepped into the era of information revolution which has brought forth amazingly advanced digital technology, Forex signals and alerts generation and provision system has also advanced and become much more sophisticated and quick. 

Now these alerts come in the form of e-mails or SMS. However, with trading Forex signals, there is no such chance to over trade your account. It is absolutely possible to learn the mental aspects of trading, by following a set of rules, and not to deviate from those rules.

Many trading Forex signals provide you with a complete set of instructions in order to take the trade. Frequently the signal will have multiple exits, which enable a trader to take money off the table in small steps. So this enables the currency trader to input all of these prices into his trading platform when he gets the signals, and then to switch off the computer.

As for any purchase, it is essential that the Forex trader first does his research into the more effective trading Forex signal service for him or her. This involves a lot of careful research, and reading various reviews and testimonials of the service in question. Before I go, in conclusion, the trader is strongly advised to practice using the trading Forex signals on a demo account first, so that the Forex trader can totally test out the profitability of the signals and become familiar with the trading platform, and reduce the possibility of making any mistakes.

Whenever possible, go for a free demo account and then try your forex signals for a few days before becoming a paid member. Forex trading does involve some planning and strategy building so be prepared for a steep learning curve before trading with real money! 

Last, here are some interesting facts about the "The Foreign Exchange Market."
The daily average volume of FOREX is: almost 5 TRILLION Dollars Per Day! The New York Stock Exchange has a daily volume of approximately 50 billion dollars. That means the FOREX is 100 times larger than the NYSE.
Actually, the daily volume of the FOREX is triple the size of all other investment markets combined!

In spite of its size, the FOREX market does not have a physical location or a central exchange. Almost all FOREX trades are executed on the internet by someone sitting at a computer with a high-speed connection. The only 24 hour financial market in the world 

The FOREX market actually follows the sun around the globe... because... as one country is closing for the day, another is just opening up. This market is open 24 hours a day, six days a week from 5:00 PM Sunday (East Coast Time) to 4:00 PM Friday (East Coast Time). This 24-hour access combined with its huge trading volume makes this...the most liquid market on earth.

Can you imagine that? The multi-trillion-dollar liquidity, combined with 24-hour trading access virtually guarantees your stop-loss orders will be executed without slippage.
As an experienced researcher, my idea is to learn and share everything I can with my readers. Stay tuned for more business, travel and career ideas as I love to write about this subjects and more...

Reference: Pradipta Kumar Bari

Monday, 24 December 2018

The History of Forex Trading



An Educational Article

The History of Forex Trading

The origin of Forex trading traces its history to centuries ago. Different currencies and the need to exchange them had existed since the Babylonians. They are credited with the first use of paper notes and receipts. Speculation hardly ever happened, and certainly the enormous speculative activity in the market today would have been frowned upon.

In those days, the values of goods were expressed in terms of other goods (also called as the Barter System). The obvious limitations of such a system encouraged establishing more generally accepted mediums of exchange. 

It was important that a common base of value could be established. In some economies, items such as teeth, feathers even stones served this purpose, but soon various metals, in particular gold and silver, established themselves as an accepted means of payment as well as a reliable storage of value. Trade was carried among people of Africa, Asia etc through this system.

Coins were initially minted from the preferred metal and in stable political regimes, the introduction of a paper form of governmental I.O.U. during the Middle Ages also gained acceptance. This type of I.O.U. was introduced more successfully through force than through persuasion and is now the basis of today's modern currencies.

Before the First World War, most Central banks supported their currencies with convertibility to gold. However, the gold exchange standard had its weaknesses of boom-bust patterns. 

As an economy strengthened, it would import a great deal from out of the country until it ran down its gold reserves required to support its money; as a result, the money supply would diminish, interest rates escalate and economic activity slowed to the point of recession. Ultimately, prices of commodities had hit bottom, appearing attractive to other nations, who would sprint into buying fury that injected the economy with gold until it increased its money supply, drive down interest rates and restore wealth into the economy. 

For this type of gold exchange, there was not necessarily a Central Bank need for full coverage of the government's currency reserves. This did not
occur very often, however when a group mind-set fostered this disastrous notion of converting back to gold in mass, panic resulted in so-called "Run on banks " The combination of a greater supply of paper money without the gold to cover led to devastating inflation and resulting political instability. 

The Great Depression and the removal of the gold standard in 1931 created a serious lull in Forex market activity. From 1931 until 1973, the Forex market went through a series of changes. These changes greatly affected the global economies at the time and speculation in the Forex markets during these times was little.

In order to protect local national interests, increased foreign exchange controls were introduced to prevent market forces from punishing monetary irresponsibility.
Near the end of World War II, the Bretton Woods agreement was reached on the initiative of the USA in July 1944. The conference held in Bretton Woods, New Hampshire rejected John Maynard Keynes suggestion for a new world reserve currency in favour of a system built on the US Dollar. International institutions such as the IMF, The World Bank and GATT were created in the same period as the emerging victors of WWII searched for a way to avoid the destabilizing monetary crises leading to the war. 

The Bretton Woods agreement resulted in a system of fixed exchange rates that reinstated The Gold Standard partly, fixing the USD at $35.00 per ounce of Gold and fixing the other main currencies to the dollar, initially intended to be on a permanent basis.
The Bretton Woods system came under increasing pressure as national economies moved in different directions during the 1960's. A number of realignments held the system alive for a long time but eventually Bretton Woods collapsed in the early 1970's following President Nixon's suspension of the gold convertibility in August 1971. 

The dollar was not any longer suited as the sole international currency at a time when it was under severe pressure from increasing US budget and trade deficits.
The last few decades have seen foreign exchange trading develop into the world's largest global market. Restrictions on capital flows have been removed in most countries, leaving the market forces free to adjust foreign exchange rates according to their perceived values.

The European Economic Community introduced a new system of fixed exchange rates in 1979, the European Monetary System. The quest continued in Europe for currency stability with the 1991 signing of The Maastricht treaty. This was to not only fix exchange rates but also actually replace many of them with the Euro in 2002. London was, and remains the principal offshore market. In the 1980s, it became the key centre in the Eurodollar market when British banks began lending dollars as an alternative to pounds in order to maintain their leading position in global finance.

In Asia, the lack of sustainability of fixed foreign exchange rates has gained new relevance with the events in South East Asia in the latter part of 1997, where currency after currency was devalued against the US dollar, leaving other fixed exchange rates in particular in South America also looking very vulnerable.

While commercial companies have had to face a much more volatile currency environment in recent years, investors and financial institutions have discovered a new playground. The Forex exchange market initially worked under the central banks and the governmental institutions but later on it accommodated the various institutions, at present it also includes the dot com booms and the World Wide Web. The size of the Forex market now dwarfs any other investment market. The foreign exchange market is the largest financial market in the world. 

Approximately 1.9 trillion dollars are traded daily in the foreign exchange market. It is estimated that more than USD 1,200 Billion are traded every day. It can be said easily that Forex market is a lucrative opportunity for the modern day savvy investor.

Reference: Divyansh Sharma

Yen, Swiss franc rise as U.S. political uncertainty, global growth woes dim mood


SINGAPORE (Reuters) - The Japanese yen and the Swiss franc gained on Monday, thanks to safe-haven buying as sentiment in financial markets remained fragile on heightened worries over political instability in the United States and fears of a global economic slowdown.

Trading volumes were thinning out with most global markets set to shut for Christmas, while Japan was closed on Monday for a holiday.

There was hardly any appetite among investors to take on risk, with a deteriorating outlook for global growth leaving stocks hurtling down for their worst quarterly performance since 2008.

That has attracted bids for the likes of the yen and Swiss franc, considered a safe-bet during times of economic and political stress. They were up about 0.1 percent each on the dollar in Asian trade.

“The global equity market rout has been driving sentiment in the currency markets. I don’t see any significant rebound in risk sentiment yet,” said Stephen Innes, head of Asia trading, Oanda.


The dollar index, a gauge of its value versus six major peers, lost 0.2 percent to 96.76.

In a widely expected move, the U.S. Federal Reserve raised interest rates by 25 basis points last week for its fourth hike of the year, underpinned by a relatively robust U.S. economy compared with its peers elsewhere.

However, with the Fed signalling “some further gradual” rate hikes despite global risks, traders are growing increasingly nervous that higher borrowing costs would hurt corporate profits and put the brakes on the world’s biggest economy.

Falling U.S. bond yields, particularly in the last several weeks, have further inflamed concerns over U.S. economic prospects and dragged on the dollar.

In recent months U.S. President Donald Trump has expressed his displeasure over rising U.S. rates, arguing that the Fed’s monetary tightening threatens to derail the economy.


Trump had privately discussed the possibility of firing Federal Reserve Chairman Jerome Powell, a move that could roil already volatile financial markets, two sources familiar with situation said on Saturday.

U.S. Treasury Secretary Steven Mnuchin, however, tweeted late Saturday that Trump had told him that he never suggested dismissing the Fed chief.

The partial U.S. government shutdown which could continue to Jan. 3, when the new Congress convenes and Democrats take over the House of Representatives, has also contributed to the souring of risk sentiment.

There was also uncertainty in the Trump administration after the president on Sunday said he was replacing Defence Secretary Jim Mattis two months early, a move apparently driven by Trump’s anger at Mattis’ rebuke of his foreign policy.

The yen gained 0.2 percent, changing hands at 111.03. The heightened fears over slowing global growth benefited the Japanese currency the most last week; it rose 2 percent on the U.S. dollar, and against the Australian dollar, the yen put on a sizable 4 percent.

“Beyond risk-off, we can see dollar/yen sell off more towards 110 if the repatriation and hedging flows start to pick up,” Innes said.

Trump has discussed firing Fed Chairman -sources
The euro was up 0.2 percent and last fetched $1.1389 on the dollar.

Elsewhere, sterling edged up 0.3 percent to $1.2675. Traders are predicting a volatile period for sterling in January, when Prime Minister Theresa May will seek parliamentary approval for her much-criticised Brexit deal. Sentiment and positioning in the pound remains bearish on growing fears of a chaotic British exit from the European Union.

The Australian dollar, often considered a barometer of global risk appetite, changed hands at $0.7060, gaining 0.4 percent on its U.S. peer after sliding more than 2 percent last week.

Reference: Vatsal Srivastava

Merry Christmas


Merry Christmas


Thank you for all the support and looking daily at our blog. Have a wonderful holiday.



Friday, 21 December 2018

Buffett profits as venture in Canadian mortgage business ends



NEW YORK (Reuters) - Billionaire investor Warren Buffett is cutting ties with a Canadian mortgage business after a nifty trade that provided the company with a potential lifeline.

Buffett’s Berkshire Hathaway Inc (BRKa.N) is “substantially” exiting its stake in Home Capital Group Inc (HCG.TO) after selling shares back to the company, the Canadian mortgage lender and Buffett said on Wednesday.

Shares of Home Capital tumbled as much as 19 percent in early trading before paring losses to trade down 13.2 percent to C$14.30 at midday.


Berkshire bought a 20 percent stake in Home Capital last year and extended a C$2 billion credit line after the Canadian company suffered a deposit exodus resembling a bank run after being accused of, and then admitting to, concealing mortgage fraud. Home Capital reached a settlement with the Ontario Securities Commission in June last year.

Berkshire’s investment and Buffett’s vote of confidence sent Home Capital shares rallying when the investment was announced.

“Buffett was brought in as a short-term stopgap,” said Marc Cohodes, a short seller betting against Home Capital, who believes the deal with Buffett did not help the average Home Capital shareholder. “He sold his name to Home Capital and the Canadian government.”

Buffett burnished his reputation as a lender of last resort in the aftermath of the 2007-2009 global financial crisis, buying high-yielding stocks and bonds in companies including Bank of America Corp.

In this case the cost of the folksy Omaha investor’s help was high.

The credit line carried a 9 percent interest rate and in May Home Capital said it was replacing it with new, lower-cost credit from an undisclosed lender.

Berkshire could see a profit of more than 70 percent for the shares it bought for around C$9.55 apiece in June 2017 and sold back to the company at C$16.50 per share.


“He single-handedly improved the odds of his investment just by getting involved,” said John Huber, managing member at Saber Capital Management LLC, which owns Berkshire shares.

The $153 million initial investment was small in relation to the $103.6 billion Berkshire has in cash and similar holdings. Berkshire initially planned to take a greater stake in the company, a move that had Home Capital’s blessing. But shareholders resisted, and proxy advisory firm Institutional Shareholder Services said the deal to sell shares to Berkshire at a discount would substantially dilute the value of other investors’ holdings with little additional benefit.

In a statement, Buffett said that Berkshire’s investment was “not of a size to justify our ongoing involvement” because shareholders did not approve the additional investment and Home Capital repaid its credit line.

“We are delighted to see Home Capital back on its feet with healthy liquidity and a solid capital position,” Buffett said. “Although we have decided to substantially exit from our investment, we will continue to cheer from the sidelines for our friends at Home.”

Fed lifts rates, sees 'some further' hikes ahead
Berkshire’s exit nonetheless comes as a housing slowdown and a sharp slide in oil prices put pressure on Canada’s economy.

“Buffett is looking at the Canadian economy much the way everybody else is and is getting out of HCG at a profit while he can,” said Jared Dillian, an independent investment strategist who is betting the value of the Canadian dollar will fall. “Buffett has done a lot of things right over the last year or two. He kept a large cash position even when he was criticized for doing so. He didn’t make any deals on the highs.”

Berkshire did not respond to requests for further comment.

Reporting by Trevor Hunnicutt


Dollar set for biggest weekly drop in 10 months



LONDON (Reuters) - The dollar consolidated overnight losses on Friday and is set for its biggest weekly drop in 10 months as the threat of a U.S. government shutdown and lower bond yields on the back of concerns of slowing economic growth weigh.

“I think the markets are focusing more now on U.S. economy-specific risk rather than global economy risks and that is weighing on the dollar,” said Thu Lan Nguyen, an FX strategist at Commerzbank in Frankfurt.

Against a basket of its rivals, the dollar was broadly steady at 96.247 but is set to fall 1.2 percent for the week, its biggest weekly drop since mid-February.


The dollar received little support from the bond markets, with yields on 10-year U.S. Treasury debt settling at 2.80 percent, well below a more than seven-year high of above 3.2 percent hit in November.

Some liquidation of long dollar positions, one of the most crowded trades in global markets, was also evident a day after the Federal Reserve raised policy rates and delivered an outlook that was less dovish than traders had anticipated.

The safe-haven Japanese yen benefited from the nervous sentiment, strengthening 0.2 percent against the dollar to 111.09 yen.


Adding to pressure on the dollar was news that U.S. President Donald Trump has refused to sign legislation to fund the U.S. government unless he got money for a border wall, risking a partial federal shutdown on Saturday.

The euro was 0.22 percent higher at $1.1470, just below a 1-1/2-month peak of $1.1486 the previous day. It was headed for a 1.4 percent gain on the week.

The pound gained 0.3 percent to $1.2690.

BOJ sets high bar on stimulus despite Kuroda's dovish language

TOKYO (Reuters) - Japan’s central bank governor has publicly flagged his readiness to ease policy if growth sputters, but sources say policymakers internally have little appetite for new stimulus, which could require a major policy overhaul and unsettle markets.

Bank of Japan Governor Haruhiko Kuroda on Thursday warned of heightening risks to the economic outlook and said the bank would ease if needed, brushing aside concerns it lacks policy ammunition to stave off another recession.

But the demerits of prolonged easing, notably the hit to financial institutions’ profits from negative interest rates, and the BOJ’s dwindling policy tool-kit have made many central bankers wary of ramping up stimulus, say sources familiar with its thinking.

It would take a global recession or a yen spike big enough to threaten Japan’s export-reliant recovery for the BOJ to pull the trigger, they say.

“Unless there is a huge market-driven global shock, the BOJ will probably stand pat,” one of the sources said.


“The BOJ needs to be more mindful of the cost of prolonged easing, which means the hurdle for additional stimulus is quite high,” another source said, a view echoed by two more sources.

In the event of a big market shock, the most likely initial response would be to push out liquidity via market operations not just in yen but dollars, to ensure Japanese financial institutions do not face trouble raising dollar funds, the sources said.

A less likely measure if yen spikes are big enough to threaten Japan’s recovery would be for the BOJ to cut rates, including short-term rates, which are already at minus 0.1 percent.

Market participants generally see the chances of the BOJ driving rates deeper into negative territory as slim, given the policy, which was introduced in 2016, has been hugely unpopular and blamed for narrowing margins of regional banks.

But Takahide Kiuchi, a former BOJ board member, believes rate cuts would be on the table if economic conditions are bad enough to justify action by the central bank.


“The adoption of negative rates was unpopular because the economy was doing well back then,” said Kiuchi, who is now executive economist at Nomura Research Institute. “If the economy is in bad shape and the yen is rising, the BOJ won’t be criticised for deepening negative rates.”

Another response to such risks would be to offer stronger assurances to markets that its ultra-easy policy will stay.

The BOJ can do this by strengthening its forward guidance, or language laying out the conditions on how long it will maintain its massive stimulus, the sources say.

Under the current forward guidance, the BOJ pledges to keep rates at current low levels for an “extended period.”

The stronger forward guidance could be accompanied by rate cuts or an increase in the BOJ’s purchases of risky assets such as exchange-traded funds (ETF), depending on what kind of strain the economy is under, the sources say.

If such steps prove insufficient, the BOJ may be forced to take bolder steps such as abandoning yield curve control (YCC) and reverting to a policy targeting the pace of money printing, some analysts say.

Fed lifts rates, sees 'some further' hikes ahead
That would allow the BOJ to ramp up bond buying again and help government finance big fiscal spending to reflate growth.

BOJ board member Goushi Kataoka has advocated a mix of bigger monetary and fiscal stimulus measures to reflate growth, though he remains a loner in the board in calls for more easing.

“The BOJ doesn’t have many tools left to ease policy, so working with the government could be the only option left,” said Shigeto Nagai, head of Japan economics at Oxford Economics.

“But that’s risky and probably a measure of last-resort.”

Reporting by Leika Kihara and Saikat Chatterjee

Growth fears and U.S. government shutdown threat slam stocks


LONDON (Reuters) - World stocks extended a steep sell-off on Friday as the threat of a U.S. government shutdown and further hikes in U.S. borrowing costs compounded investor anxieties over the trajectory of global economic growth.

European shares opened in negative territory, following in the footsteps of U.S. and Asian markets. The pan-European STOXX 600 fell over half a percent, continuing its slide towards lows not seen since the end of 2016.

Most European bourses and industry indexes were in the red after the S&P 500 fell overnight, heading for its worst quarter since the dark days of the financial crisis in late 2008, with a loss of 15 percent so far. The Nasdaq has shed 19.5 percent from its August peak, just shy of confirming a bear market.

Oil prices, which slid just over 4 percent on Thursday, were reclaiming some ground. The dollar, which had suffered its biggest one-day drop on the yen since November 2017 on Thursday, lost a further 0.1 percent against the yen.

“China is cooling and the euro zone is slowing down, and some of the economic indicators from the U.S. have been a bit soft recently, but yet the Fed hiked rates and suggested that two more interest rate hikes were lined up for 2019,” said Michael Hewson, chief markets analyst at CMC Markets in London.

He said speculation the U.S. economy could be headed for a recession has picked up, dampening global sentiment. “Fear about a U.S. government shutdown is playing into the mix too.”

Eyes will be on U.S. inflation numbers due later on Friday, day, which include the Federal Reserve’s preferred measure of core inflation.

E-Mini futures for the S&P 500 were off half a percent, while MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.2 percent.

The MSCI All-Country World index, which tracks shares in 47 countries, was down 0.2 percent. It was set for its worst week since March.

Japan’s Nikkei lost 1.1 percent to close at its lowest since mid-September last year, after giving up 5.6 percent this week. Australian stocks slipped 0.7 percent, hovering just above a two-year trough hit earlier in the session.

Chinese blue chips lost 1.4 percent, in part after the United States accused Beijing of orchestrating the hacking of government agencies and companies around the world.

Sentiment had turned sour on Thursday when the U.S. Federal Reserve largely retained plans to increase interest rates despite mounting risks to growth.


Markets were further spooked when U.S. President Donald Trump refused to sign legislation to fund the U.S. government unless he received money for a border wall, thus risking a partial federal shutdown on Saturday.

“Political brinkmanship in Washington is further heightening market uncertainty,” said Westpac economist Elliot Clarke.

“Friday will be a tense day in Washington, and for financial markets, as a last-minute compromise is sought.”

Adding to the air of crisis was news U.S. Defense Secretary Jim Mattis had resigned after Trump announced a withdrawal of all U.S. forces from Syria and sources said a military pullback from Afghanistan was on the cards.

The brittle mood showed on Wall Street where the Dow ended Thursday with a loss of 1.99 percent. The S&P 500 dived 1.58 percent and the Nasdaq 1.63 percent.

STAMPEDE FOR THE EXITS
The mood change has triggered a rush out of crowded trades, including massive long positions in U.S. equities and the dollar and short positions in Treasuries.

Asia, Europe stocks slide after Fed rate hike
Lipper data on Thursday showed investors pulled nearly $34.6 billion out of stock funds in the latest week and were heading for the biggest month of net withdrawals on record.

There was also a sense of capitulation in currency markets as the dollar dived 1.1 percent on the yen on Thursday to hit a three-month trough at 110.80. It was last changing hands at 111.23 having shattered several layers of chart support.

The euro dipped 0.1 percent to $1.1430, having jumped to its highest in over six weeks at $1.1485. Against a basket of currencies the dollar gained some ground, up 0.3 percent at 96.527 after suffering its largest single-session fall in two months.

Yields on the 10-year U.S. Treasury were back up to 2.795 percent after hitting their lowest since early April at 2.748 percent on Thursday’s bid to safety. As recently as October, they had been at a seven-year top of 3.261 percent.

The gap between two- and 10-year yields was back up to just 12 basis points, after flattening to 9 basis points overnight.

The rally in longer-dated bonds has been fueled by the huge slide in oil prices, which will pile downward pressure on inflation at a time when the global economy is already slowing.

Both Brent and U.S. crude futures reached their lowest in more than a year overnight, but edged higher on Friday on talk that production cuts by OPEC might be larger than first thought.


U.S. crude was 0.8 percent higher at $46.23 a barrel, while Brent rose 0.4 percent to $54.59.

Gold was underpinned by the reversal in the dollar to hold at $1,259.12 an ounce.

Reporting by Ritvik Carvalho

Thursday, 20 December 2018

Sterling rallies vs dollar ahead of BoE meeting


LONDON (Reuters) - Sterling gained nearly half a percent against a broadly weakened dollar on Thursday, as traders prepared for British retail sales data and the Bank of England’s interest rate decision.

Analysts put most of the pound’s buoyancy down to dollar weakness, with the U.S. currency struggling after the Federal Reserve struck a more dovish tone on monetary policy than in previous months.


Worries about Prime Minister Theresa May’s ability to win parliamentary approval for her Brexit deal in January continue to weigh on the pound, and will almost certainly keep the Bank of England from changing its monetary stance.

The BoE rate decision is due at 1200 GMT and the retail sales numbers at 0930 GMT. According to a Reuters poll of analysts, retail sales are expected to have grown 0.3 percent month-on-month in November.


“With Britain facing unprecedented economic uncertainty as Brexit approaches, the last thing the Bank would want to do is add to people’s worries,” Marshall Gittler, chief strategist at ACLS Global.

“In any case, following yesterday’s inflation data, which showed inflation slowing as expected, it would be hard for them to take a more hawkish stance...I expect them to be relatively dovish in the face of such uncertainty, which may cause the pound to weaken even further.”


FTSE falters on Fed comments


(Reuters) - UK shares fell to their lowest in more than two years on Thursday, joining a wider market selloff, after the U.S. Federal Reserve bank dampened hopes for a milder policy outlook even as the global economy cools.

The FTSE 100 .FTSE was down 1.3 percent at 0850 GMT after hitting its lowest since Aug. 4 2016 in early deals. Only three stocks - Shire, Severn Trent and British American Tobacco - were in positive territory.


The mid-cap index .FTMC was 1.6 percent lower, its weakest since September 2016 partly tugged down by lacklustre response to builder Kier Group's rights issue.

The UK indexes are on track for their worst year since the 2008 financial crisis, and the Fed’s tone deepened concerns already augmented by Brexit worries.


Despite calls by U.S. President Donald Trump for the Fed to stop raising interest rates, the central bank on Wednesday stuck by a plan to keep repealing support from an economy it views as strong, sending Wall Street spiralling down.

Banks with a larger international exposure were the biggest drags on the main index, with heavyweight HSBC dipping 2.3 percent as the weaker U.S. dollar weighed.

The Fed news and falling greenback also knocked mining stocks, with Antofagasta, BHP Group and Anglo American all down between 2.8 percent and 3.5 percent.

Oil prices tumble
In news-driven moves, mid-cap construction firm Kier Group fell as much as 12 percent in early trade before trimming some of the losses as not even half of its shares were bought by shareholders in a fundraising. Its market value has already shrunk 64 percent this year.

Investors have dumped shares in the construction sector amid worries about mounting debts after Carillion’s collapse and the impact of Brexit on real estate.

Among smaller moves, AIM-listed electricity and gas supplier Yu Group slumped 22 percent after it admitted to serious historical failures in an accounting review and said its profit would be hit as a result.

Reporting by Tommy Wilkes and Muvija M

Fed raises interest rates, signals more hikes ahead


WASHINGTON (Reuters) - After weeks of market volatility and calls by President Donald Trump for the Federal Reserve to stop raising interest rates, the U.S. central bank instead did it again, and stuck by a plan to keep withdrawing support from an economy it views as strong.

U.S. stocks and bond yields fell hard. With the Fed signaling “some further gradual” rate hikes and no break from cutting its massive bond portfolio, traders fretted that policymakers could choke off economic growth.

“Maybe they have already committed their policy error,” said Fritz Folts, chief investment strategist at 3Edge Asset Management. “We would be in the camp that they have already raised rates too much.”

Another technical tweak as Fed wrestles to control policy rate
Interest rate futures show traders are currently betting the Fed won’t raise rates at all next year.

Wednesday’s rate increase, the fourth of the year, pushed the central bank’s key overnight lending rate to a range of 2.25 percent to 2.50 percent.

In a news conference after the release of the policy statement, Fed Chairman Jerome Powell said the central bank would continue trimming its balance sheet by $50 billion each month, and left open the possibility that continued strong data could force it to raise rates to the point where they start to brake the economy’s momentum.


Powell did bow to what he called recent “softening” in global growth, tighter financial conditions, and expectations the U.S. economy will slow next year, and said that with inflation expected to remain a touch below the Fed’s 2 percent target next year, policymakers can be “patient.”

Fresh economic forecasts showed officials at the median now see only two more rate hikes next year compared to the three projected in September.

But another message was clear in the statement issued after the Fed’s last policy meeting of the year as well as in Powell’s comments: The U.S. economy continues to perform well and no longer needs the Fed’s support either through lower-than-normal interest rates or by maintaining of a massive balance sheet.

“Policy does not need to be accommodative,” he said.

In its statement, the Fed said risks to the economy were “roughly balanced” but that it would “continue to monitor global economic and financial developments and assess their implications for the economic outlook.”

The Fed also made a widely expected technical adjustment, raising the rate it pays on banks’ excess reserves by just 20 basis points to give it better control over the policy rate and keep it within the targeted range.

CHOPPY WATERS
The decision to raise borrowing costs again is likely to anger Trump, who has repeatedly attacked the central bank’s tightening this year as damaging to the economy.


The Fed has been raising rates to reduce the boost that monetary policy gives to the economy, which is growing faster than what central bank policymakers view as a sustainable rate.

There are worries, however, that the economy could enter choppy waters next year as the fiscal boost from the Trump administration’s spending and $1.5 trillion tax cut package fades and the global economy slows.

“I think that markets were looking for more in terms of the pause,” said Jamie Cox, managing partner at Harris Financial Group in Richmond, Virginia.

“It’s not as dovish as expected, but I do believe the Fed will ultimately back off even further as we move into the new year.”

The benchmark S&P 500 index tumbled to a 15-month low, extending a streak of volatility that has dogged the market since late September. The index is down nearly 15 percent from its record high.

Benchmark 10-year Treasury yields fell as low as 2.75 percent, the lowest since April 4.

ECONOMIC PROJECTIONS
Fed policymakers’ median forecast puts the federal funds rate at 3.1 percent at the end of 2020 and 2021, according to the projections.

Fed lifts rates, sees 'some further' hikes ahead
That would leave borrowing costs just above policymakers’ newly downgraded median view of a 2.8 percent neutral rate that neither brakes nor boosts a healthy economy, but still within the 2.5 percent to 3.5 percent range of Fed estimates for that rate.

Powell parried three questions about whether the Fed intended to restrict the economy with its rate policy, but gave little away.

“There would be circumstances in which it would be appropriate for us to go past neutral, and there would be circumstances in which it would be wholly inappropriate to do so.”

Gross domestic product is forecast to grow 2.3 percent next year and 2.0 percent in 2020, slightly weaker than the Fed previously anticipated. The unemployment rate, currently at a 49-year low of 3.7 percent, is expected to fall to 3.5 percent next year and rise slightly in 2020 and 2021.


Inflation, which hit the central bank’s 2 percent target this year, is expected to be 1.9 percent next year, a bit lower than the 2.0 percent forecast three months ago.

There were no dissents in the Fed’s policy decision.

Reporting by Ann Saphir and Howard Schneider

Wednesday, 19 December 2018

Sterling rises for third day before price data


LONDON (Reuters) - Sterling rose for a third consecutive day on Wednesday on hopes that Prime Minister Theresa May can avoid a no-deal Brexit though gains were capped before inflation data which might whittle down the probability of an interest rate hike next year.

Headline inflation data is expected to show a decline to 2.3 percent for the month of November from 2.4 percent previously and edging towards a 2 percent target in the coming years by the Bank of England.

A sharp fall in inflation might further weigh on market expectations of a rate hike. Money markets are pricing in an 80 percent probability of one interest rate hike next year.

The British pound gained 0.2 percent to $1.26661, moving further away from a 20-month low of $1.2477 hit last week. Against the euro, the pound was modestly weaker at 90.03 pence.

However markets would be wary of placing too much of an emphasis on economic data with the central bank repeatedly saying that the outcome of Brexit negotiations will be a key factor for the path of future interest rates.

May is yet to win the support of a deeply divided parliament for the deal she struck last month with European Union leaders to maintain close ties with the bloc with less than three months until Brexit.

“The government is playing a very hardball game, however, as it delays the Brexit vote until the New Year, which is curtailing the debate over May’s plan and effectively giving little time for alternatives to be found,” Scotiabank strategists said in a note.


LONDON (Reuters) - Global equity and crude oil markets attempted on Wednesday to claw their way out of a three-day long plunge that saw investors seek out the safety of bonds amid mounting pessimism over world growth.

Oil’s spectacular fall - down almost 10 percent since last Thursday - and world stocks’ plunge to 19-month lows have spurred speculation the U.S. Federal Reserve might be done with tightening after its policy meeting later in the day.

While Brent crude inched up 0.5 percent to $56.5 a barrel after plunging 6 percent overnight, its 35 percent fall since October is sending a disinflationary pulse through the world just as trade and economic activity are cooling.

The latest jolt on the growth front came from Japan which said its export growth slowed to a crawl in November, an ominous signal for the trade-focused economy.

And on Tuesday, logistics and delivery firm FedEx, considered a bellwether for the world economy, slashed its 2019 forecasts, noting “ongoing deceleration” in global growth.

European shares rose 0.3 percent and MSCI’s global equity index firmed a touch, though it has fallen 6 percent since the start of this month .MIWD00000PUS, given the fragile nature of the Sino-U.S. tariff truce and signs that company earnings worldwide are slowing.


While equity futures signal a stronger opening on Wall Street, U.S. stocks are set for their worst December since 1931.

“It’s a confluence of several important factors: the market is adjusting its outlook on growth and there is a consensus we will see a slowdown. More importantly, the market is adjusting to the idea this will translate into lower earnings growth,” said Norman Villamin, chief investment officer for private banking at Union Bancaire Privee in Zurich.

“It’s being complicated by the tightening liquidity situation with the Fed expected to move today and the ECB having signalled the end of its (stimulus)”.

Futures are sticking with a two-in-three chance of a rate rise on Wednesday and Villamin expects the Fed to move twice in 2019. That’s a more hawkish call than the broader market which is pricing less than one rise in 2019, down from three not long back.

The expectations of a Fed pause and the equity selloff sent 10-year Treasury yields to the lowest since August at 2.799 percent - down 20 basis points in December - while two-year yields touched a three-month trough of 2.629 percent, sliding from November’s 2.977 percent peak.

Yields in Japan and Australia also reached multi-month lows.


Reasons for the bond rally were easy to find. Bank of America Merrill Lynch’s closely watched monthly survey found more than half of its participants now flagging a global economic slowdown next year. It also showed the third biggest decline in inflation expectations on record.

The poll also revealed the largest ever one-month rotation into fixed-income assets, their gains coming at the expense of equities.

The steep drop in Treasury yields undermined one of the U.S. dollar’s major props and pulled its index back 0.3 percent to 96.8, from a recent top of 97.711.

Against the yen, the dollar fell 0.15 percent to 112.37 yen JPY=, while the euro nudged up to $1.1383 EUR= from a $1.1266 low.

Villamin of UBP said that while uncertainty had grown about the Fed’s rate rise path, other currencies from the yen to the euro still lacked interest rate support.

“Why the dollar won’t be too weak is that the alternatives are not attractive,” he said. “The only real attractive currency out there is the dollar ... we think dollar strength will stay another 3-6 months.”

U.S. futures pointed to a firmer Wall Street opening.

Fed expected to hike interest rates, defying Trump
The bright spot on world markets is Italy where bond yields continued their fall after Rome struck a deal with the EU Commission over its contentious 2019 budget, signalling an end to weeks of wrangling.

The Italian/German 10-year bond yield gap - a measure of Italian risk - narrowed to around 255 bps, the tightest since late Septembe. That spread had been over 300 bps as recently as end-November.

“Everyone was expecting an agreement to be reached, but many people were expecting this to come in Q1 or Q2 next year,” said Commerzbank rates strategist Michael Leister.

“With risk sentiment stabilising this morning, it looks like the momentum can increase in Italian bonds.”

Reporting by Saikat Chatterjee and Sujata Rao