MORNING BRIEFING: The Fed confident about the recovery, increase in carry trades.

[RTFX-Trading]

MORNING BRIEFING: The Fed confident about the recovery, increase in carry trades.

What’s new:
ECB: deflation has been avoided, the system must be strengthened.
Oil: crude oil ends down after disappointing US GDP.
US: Fed is confident about the recovery, doubts about employment.
IMF: Strauss-Kahn says the Euro is probably too high.
Us: Q3 GDP lower than expected.
US: 5th month of successive rise in property prices.
Russia: new lower interest rate by the Central Bank of Russia.
Germany: Business Climate rise again.

Today:


Rates in Asia and Indices:
EURUSD: 1.5027 - 1.4955.
USDCHF: 1.0096 - 1.0043.
EURUSD: 1.6717 - 1.6576.
EURJPY: 132.69 - 132.06.
USDJPY: 88.63 - 88.20.
Dow Jones: 10'433 -0.16%.
NASDAQ: 2'169 -0.31%.
S & P 500: 1,105 -0.05%.
Nikkei: 9'441 +0.43%.
Shanghai: 3'254 +0.95%.
Gold: $1'175.
Crude oil: $76.22.
 
Comments:
The situation on the foreign exchange market is currently stagnant. On the one hand, some investors are optimistic about global economic prospects for 2010, arguing that the worst of the crisis is behind us. On the other hand, some investors expect a very difficult year in 2010; the economic situation is very unstable. The market will focus in coming weeks on expectations of change in interest rates monetary policy of different central banks, and the end of various stimulus packages.
According to the OCED report on the economic outlook released recently, the Organization for Cooperation and Economic Development expects the Euro zone, the United States, United Kingdom and Japan to maintain status quo on interest rates. Regarding exit strategies, the organization said that the implementation of exit strategies cannot be delayed, as keeping stimulus for too long, could be damaging to the economy.

Basically, the interest rates of a country have a direct impact on their national currency. A high rate of return of a currency makes this very attractive. As the graph below, when the Bank of England began its wave of declining interest rates December 13, 2007 to March 12, 2009, lowering interest rates from 5.75% to 0.50%, the British Pound fell from 2.0414 to 1.3993 against the US Dollar, a drop of over 30% in 15 months. The market does not miss the opportunity to enjoy a change of policy interest rates and the market will act aggressively on the currency that gets favored by expectations of rising interest rates.




Have a good day.

Nicolas Longchamp
RTFX Ltd
Head Office
The Cornerstone Complex, 16th September Square | Mosta MST 1180 | Malta
Tel:  +356 23 31 00 00
Fax: +356 21 41 24 58
Web: www.rtfx.com

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