Forex rebates on every trade - win or lose!

Ooooooooh - melted chocolat I think - bet you are well and truly miffed about that stop - given where it's now trading.

Just to make you feel better (I know, I know, that's not very likely) I've just planted a short on at 788 - pretty numbers and all that. Looking for 666 - to remind me of the evil one who lurks in all those corners you'de prefer no-one looked in ;))))

Yen gain lock will hit while I'm on here.
I don't subscribe but the Harry hindsight site run by Adrian P- I can't remember the last name has long stated the Friday PM effect when all the big institutions phone one another and decide? which way the crosses will go. He claims to receive these calls but I'm sure we can work it out for ourselves.

Looks like the Hooray Henrys have decided on 18800 for cable then !!!

yep - just gonna wait a bit...you little devil

18804 - stop at 30 *gulp*

Don't you mean wait a bitty - 'cos I'm a cool dude like wot those FTSE/DAX traders are. I'm short again - 'cos I'm 'ard ;)

And, true to form, it's time for Friday Night Balti.

Good luck - it's 666 from here - so I hope that bit of fiddling you were doing with your bits is ready with the "outta here" message .......

Tough stuff sometimes

SAS Trader - who thingymybobs dares.

mg (Macho Go-getter - even if my name is Malcolm - sulk - it's not my fault, I blame it on my mum)

chocolat. On cmc the highest sell price was 1.8802; who are you with, or is it a CFD?

edit. No - it was 05. Sorry.

hodgins, pattern......

Not going for the bucket tonight, MachoGeezer, but I'll be outta here later
stop firmly in place... maybe :S

My friend has a cat called Malcolm..

choccy
Is he 'ard like me - with half an ear and other war wounds from protecting my manor ;)

That's it, mg - with an M on his forehead, he only has to see his reflection somewhere to remember his name...although he grew up thinking he was a mutt :)

U.S. DOLLAR MARKET ANALYSIS
Saturday, January 22, 2005 14:18 GMT
Weekly Commentary
By Investica
http://www.investica.co.uk


Long-term dollar vulnerability
The dollar remained generally firm over the week and the US currency strengthened to a high of 1.2925 before a retreat back to 1.3050 in New York on Friday. There are still conflicting forces on the dollar and the data this week offered some near-term advantage to the US currency as structural fears have eased. There will still be major doubts over longer-term trends.

The prime focus as far as data is concerned was the Treasury capital flows data. There were inflows of US$81.0bn for November compared with a revised US$48.3bn in October. The headline data eased immediate fears that the US would face difficulties in securing sufficient capital inflows to offset the current account deficit. There will be some doubts over the quality of the inflows and there will also be concern that the weak Wall Street performance in 2005 will discourage capital inflows as well as pushing capital out of the US. Nevertheless, there will be reduced short-term fears over deficit financing. There will also be optimism over repatriation flows generated by the administrations 2005 tax break. The overall impact may be relatively low, but speculation over inflows will help to curb aggressive dollar selling.

The Philadelphia Fed index weakened to 13.2 in January from 25.4 the previous month and there was also a decline in the New York manufacturing index. The interest rate trends have remained significant and there has been a barrage of Fed comments over the past week. Fed Governor Poole, for example, warned that the Fed would be prepared to make more aggressive action to keep inflation under control. The December inflation figures were slightly weaker than expected with a 0.1% decline while the underlying rate rose 0.2%. The Fed will be concerned over potential wage inflation and will certainly monitor the situation closely, but the most likely outcome is that the central bank will continue with measured tightening and 0.25% rate increases. There were hints to this effect by Greenspan in a magazine interview and it is Greenspan"s view that counts.

G7 exchange rate policy will remain an important market focus. European officials are likely to push for Asian appreciation at the early-February meetings, but there is no evidence yet that Asia is prepared to take action. Further resistance to Asian gains would increase the risk of fresh upward pressure on the Euro given that markets still expect dollar trade-weighted depreciation. There is still the longer-term potential for Asian appreciation which would ease strengthening pressure on the Euro. There will be underlying buying of Euros by global central banks which will offer good Euro support against the dollar.

Check out your laptop, mg ;)

Why is it that contrary to the best economic theory, despite a stock market collapse that wiped out values the equivalent of 90 percent of GDP, despite growing current account and budget deficits, despite the massive body blow of September 11th, despite a momentary decline of its exchange rate, despite (an admittedly mild) recession, and despite two major wars, the U.S. dollar today is more of a world reserve currency than it was before these events happened?

And why is it that the dollar attracts even greater surpluses of foreign capital that outrun trade deficits by about $ 100 billion per year?

The short answer is that the U.S. economy differs from all other economies in a crucial respect. The growth driver of the U.S. economy is a unique combination of entrepreneurship and high technology; the growth driver of every other economy is export demand.
Europe, Japan, China, and the Asia-Pacific region are all export-driven economies whose growth depends on U.S. markets. The U.S. economy depends for its growth on internal, entrepreneurial high-tech ferment. So long as this ferment keeps providing rates of return on capital higher than those in the rest of the world, international demand for U.S. investment assets will continue to be higher than U.S. demand for foreign goods and services.

And American capital account surpluses will continue to cause American current account deficits.

More important, however, is the question: Is there a prospect for exchange rate stability anytime in the future? Where is the international system of currency exchanges heading, given this growing difference between the U.S. economy and the rest of the world. . .?

The Next Twelve Months

According to consensus estimates, a year from now the U.S. economy will likely be expanding at its sustainable 4 percent GDP growth rate or higher, Japan at about 2 percent, and the Eurozone at 0 percent. The official forecasts of the central banking authorities of the three areas more or less concur.

The foreign exchange markets, however, have not priced these consensus forecasts into the exchange rates for a simple reason: there is widespread disagreement about the future course of inflation/deflation rates in the U.S. dollar area.

Simply put, the bond market in the United States believes that the Federal Reserve's commitment to keeping short rates low for a long time will produce inflation down the road. . . .

What Fed watchers missed during Alan Greenspan's testimony to Congress last July was a crucial exchange between the Fed chairman and Democratic Senator Charles Schumer of New York, [who] asked if the Fed were not concerned that, by keeping short rates low when the economy undergoes robust expansion, it might not trigger higher inflation down the road.

Greenspan's reply was rather stunning. Without equivocation, without hedging, and without his trademark convoluted syntax, he flat-out asserted that both he and the Federal Open Market Committee have unanimously concluded that the world economy has entered a new era of downward price pressures and declining inflation rates and has left behind the age of inflationary concerns.

This is why the Fed does not fear that low short rates in the emerging expansion will result in inflationary pressures. And it explains why the Fed has separated its assessments of future inflation from its assessments of future GDP growth.

Had he been pressured to elaborate, Greenspan might have pointed out that for at least the next five years, China, Japan and their satellite exporting economies of Asia will have no choice but to keep their currencies cheap. . . .

Under this arrangement, China, Japan, and the Asia-Pacific can be viewed as parts of the world "dollar zone," with some local leeway for adjustment.

Rather than a world of three currency zones, we have at present a de facto . . . world of two currency zones: the larger and faster-growing dollar zoneencompassing North America, Japan, China, and the Asia-Pacificand the smaller, zero-growth euro zone.
A Little History

From the dawn of history until August 15, 1971, mankind used commodity currencies or commodity-based currencies, with the most predominant commodity being gold. The Roman Empire maintained a gold-coin exchange system for about 1,500 years from its inception to its demise.

The system continued in the years of fragmentation that ensued, until it was fully replaced by the "gold standard" system of the British-led Industrial Revolution, whereby banknotes replaced gold coins on the strength of the gold reserves in the vault of the issuing banks.

That system was essentially managed by the Bank of England and by Lombard Street, where most of the world's savings and available liquidity resided. It lasted until the First World War, whereupon it was replaced by the "gold exchange standard," which differed from its predecessor in that it was the central banks' gold reserves that regulated the supply of banknotes, and not those of private-sector banks. . . .

After the Second World War, the Bretton Woods system restored the gold exchange standard. The exchange rates that were initially set between the U.S. dollar and the European and Japanese currencies were understood to be temporary and subject to revision when the war-ravaged economies of Europe and Japan were restored to full capacity. . . .

When, however, Japan, Germany, and the other European countries had fully recovered, they refused to renegotiate their exchange rates with the United States. The deliberateand by agreement temporaryovervaluation of the dollar at the end of the Second World War proved politically impossible to remedy, and soon gave rise to American trade deficits and the draining of U.S. gold reserves.

At some point, the Nixon administration presented a set of alternative solutions to the European allies: either all countries together would devalue their currencies with respect to gold (i.e., set a new higher official price for gold) or European countries would begin to share in the costs of the military defense of Europe (which had been getting a free ride throughout the Cold War). . . .

The only solution acceptable to France, England, and later also the Socialist West German Chancellor Willy Brandt, was for the U.S. dollar alone to be devalued against gold. Implicit in the demand was that even talk about devaluing the dollar would trigger a run on American gold reserves. France was, in essence, organizing a run on the dollar in the expectation that gold would replace it as the world reserve.

To rub salt on the wounds, on August 4, 1971, France demanded that some $190 million of American gold be used to repay the last installment of France's debt to the International Monetary Fund. It was eleven days later that Nixon announced the decoupling of the dollar from gold, ending the age of the gold exchange standard.


For the first time in its history, mankind began to organize its transactions on the basis of fiat money alone. We called it the "floating exchange rate" system. A better name would have been the "fiat-money exchange standard" system. . . .

The first decade, 1971-1981, was an unmitigated disaster. Governments throughout the world, with the United States at the lead, celebrated their liberation from the discipline of the gold exchange standard by printing money with abandon. This triggered worldwide inflation and
stagnation. . . .

The second decade, 1981-1991, was a struggle to tame inflation, with the United States again at the lead. . . . In the United States and the United Kingdom under Ronald Reagan and Margaret Thatcher, fiscal and regulatory policies in the form of tax cuts and entrepreneurial incentives became the stimulus tools of choice in place of the discredited tools of monetary stimulation. In Europe, runaway fiscal and monetary looseness (except for Germany) produced widespread stagnation.

The third decade, 1991-2001, provided the evidence that the value of any fiat-money currency, to a large extent, depends not on its trade balance but on its relative rate of return on capital, and the capital account balance that this produces. Superior U.S. rates of return established and reinforced a "strong dollar" policy.

The decade also produced the so-called "Washington consensus," which merely codified the Reagan-Thatcher lessons of the 1980snamely, that inflation, protectionism, and nationalizations of economies stunt growth. . . .

Entering the fourth decade of this provisional arrangement, the dollar seems to enjoy additional advantages, stemming from the fact that the Eurozone, Japan, and China are all locked into export-driven economic policies that make them dependent on the well-being of U.S. markets and on competitively cheaper currencies.

Moreover, their (and especially the euro's) dependence on export surpluses does not allow third parties to accumulate their currencies in a way that would allow them ever to be used as international reserves in any meaningful quantities and levels of liquidity.


The crucial question is this: How long can the United States sustain its current account deficits?

The answer is political. If the world were on some kind of gold or other commodity-money standard, the U.S. current account deficits would have long ago wrecked the dollar. But the world is not on a gold standard, it is on a de facto dollar standard. . . .

Accordingly, there are three possible alternative outcomes regarding the U.S. current account deficit:
First Alternative: As long as the United States maintains a competitively superior rate of return on capital, foreign banks' demand for dollar reserves will continue and U.S. current account deficits will be sustainable.
Second Alternative: If the U.S. rate of return on capital declines to European or Japanese levels, the U.S. current account deficit will not be sustainable and the existing world monetary arrangement will have a calamitous end.
Third Alternative: If European and Japanese rates of return on capital are raised to or near U.S. levels and robust economic expansion takes place there, then the U.S. current account deficits will begin to decline in rapid order and will no longer pose a problem.

Criton Zoakos (Leto Research, Leesburg, VA, USA)

was about to say choclat ..theres no way u wrote that,,:)

Would you like a precis? :)

In short

The US economy is unique in that it is NOT export-driven to achieve and sustain growth; it is entrepreneur and technology driven.
There are two real currencies in the world today the dollar (US, China, Japan and the far East) and the Euro (Europe).
The relative rates of return on capital between these two zones drives where money gets invested and therefore the relative strengths of the two currencies.

Obviously, the ROR in the dollar zone is far above that of the Euro zone today.
Implied is that short term movements between the dollar and the Euro are temporary until the RORs get aligned.
Also implied is that since the growth rate in the Euro zones is roughly zero, there is a long way to go before they can provide the ROR of the dollar zone.
Further, the reliance of the Euro zone on exports to drive growth hinders their ability to make the fundamental changes needed to get their RORs up.
The dollar zone is driving prices down making it even harder for the Euro zone to catch up.
The Euro zone can lever the Eastern European countries, possibly, to help with their overall ROR.
Trade deficits are not particularly important anymore the history of the commodity-based currency vs the way currencies are valued today tells the tale.

Red letter date in world history - August 15, 1971. The first time in world history that currency values were NOT tied to a commodity (like gold), but were allowed to float.

1971-1981: print money like crazy; inflation/stagnation
1981-1991: tame inflation; tax cuts and entrepreneurial incentive drive growth
1991-2001: proves that the value of a currency is related to its relative ROR, not to its trade balance

This seems like a pretty good satellite view of world economics. It also says that anything the US does to alter its entrepreneurial/technological growth mechanism is bad, and it lays out a very interesting case for a future with low inflation yet sustainable growth resulting from the change to floating currency.

will it hurt

It did, jeffie, my fffingers are fffrozen.