Forex rebates on every trade - win or lose!

Thanks Hilary

Agree with you re the contrarian bit - analysts are wonderfully wise after the event.

Could explain "carry trade" for me. I presume its's something to do with expectations of future interest rates.

Thanks

Seymour "Much to learn" Clearly ;-)

Seymour,

It's the process of borrowing money in a country which has low interest rates and investing it (typically into bonds) in a country with a high interest rate or yield. The yield is used to service the loan.

You experience something similar when you hold rolling positions overnight in that you are either paid or you pay interest on the position according to the interest rate differential between the two sides of the pair. Similarly, it is the reason why quarterly futures contracts are skewed so far off spot.

While US interest rates were only 1%, the cable carry trade was attractive and it is obviously not so at the moment.

Thanks Hilary, much appreciated.

The more I know the harder it is to understand !!!

Seymour,

No problem. It's why interest rate events and speculation move the market so much.

For instance, yesterday morning cable fell sharply onwards of 7am whilst the Euro held reasonably firm against the Dollar. The reason being that the Rightmove House Price thingey had been published on Sunday evening (see calendar above). It showed house prices had fallen quite dramatically which in turn heightened speculation that UK interest rates would fall sooner rather than later. Virtually every piece of economic news can be extrapolated into the likely effect on interest rates and, therefore, the effect on that particular currency.

And we still have the BOE minutes to follow tomorrow.

Indeed Choccy. Greenspan as well.

Two down, one up and six holds last month, but it was the last month for one of the members' who voted down (was it Marion Bell???). Market says 6-3 this month, but I'll be a little surprised if it is.

edit: Apparently it was 7-2 last month - I thought it was 6-2-1. Oh well.

Just wondering whether the minutes effect is in the price already after last time.

BoE kept benchmark rate unchanged in July by close 5-to-4 vote
AFX


LONDON (AFX) - The Bank of England came within a whisker of lowering interest rates by a quarter point in July, strengthening expectations that a cut will materialise in August.

The minutes to the July meeting, published this morning, showed that the number of dissenting votes doubled to four in July from just two the previous month.

The votes for a reduction came from Kate Barker, Charles Bean, Stephen Nickell and the Monetary Policy Committee's newest member, David Walton in his inaugural vote.

The majority, led by BoE governor Mervyn King opted to keep the benchmark repo rate unchanged at 4.75 pct for the 11th month running on July 7, the same day when the public transport system was attacked by terrorists.

Markets will find ample reason to back up rate cut expectations in the latest set of minutes. For one, the close 5-to-4 vote was not expected.

The dovish four who had voted for a cut said the downward revisions to quarterly GDP made in late June warranted lower borrowing costs. They felt that since economic growth had been below trend over three quarters, this implied 'a softer outlook going forward.'

They cited the risk that household spending may fall even further given the heavy debt burden carried by UK consumers.

Market predictions that interest rates will be lowered may have to be met in order to prop up consumer spending, they said

'Although the change in market interest rate expectations could prove supportive of household spending, it would be necessary to validate those expectations to some degree if that support were to be maintained,' they said.

Additionally, they said that business investment was 'more likely to disappoint' while the labour market 'appeared to be softening slightly.'

One rate setter even went so far as to say that 'monetary policy was no longer accomodative,' the minutes revealed.

Overall, the doves said a cut in July would reduce the risk of greater changes in the benchmark rate at some point in the future.

The majority on the other hand felt that a rate cut right after GDP growth for the first quarter was revised down may send out wrong signals to the market.

It could, they felt, 'be misinterpreted as an attempt to target output' and not inflation.

They felt there was 'no great risk' in waiting for more evidence and analysis before changing the benchmark rate.

The minutes also revealed that the MPC learnt about the bombs that rocked London towards the end of its policy meeting.

None among the nine-member panel felt that the bombings should alter the rate verdict that day.

sivakumar.sithraputhran@afxnews.com

That'll be why cable just dropped off the cliff, then?

Certainly is Helen - and the Pound isn't faring any better against Euro either.

Just shows how easy it is to make mistakes. I thought the minutes came out this afternoon and didn't have the sense to check. Fortunately too busy looking at stock positions to look at cable. Phew

So's you don't forget, Helen ;)

Alan Greenspan Speaks! Wednesday - Jul 20, 2005

10:00 AM ET : Federal Reserve Chairman Alan Greenspan to deliver semiannual monetary policy report to House Financial Services Committee, in Washington .

Alan Greenspan Speaks! Thursday - Jul 21, 2005

10:00 AM ET : Federal Reserve Chairman Alan Greenspan to deliver semiannual monetary policy report to Senate BankingCommittee, in Washington .

Thanks for that Choc :o)

Well well well - we're almost back to where we were at 9:30 :)

Couldn't resist the temptation to have another bash at cable tonight, having sold a relative to raise a small pot.
Still got the old touch! those of you with minute charts can see the point I took a trend long @ 85, exactly 2 minutes before it fell straight through! (19:07 for the lazy)
S & R'd it from the piqued school of trading for -11.
Too old and slow though, 1 point between close & open, (@ 74 & 73), and just left the bugger to slide down the other side, stopped for + 41, best i've done for weeks.
Now changed tack, sod the trend line, left a -0 stop loss on a cable short @ 37.

Finally achieved an "up-and-over" on cable, long @ 398, closed @ 432, short @ 432 and finally stopped out @ 416.
5 points from perfect of course, should have reversed @ 437......but I don't care, it's my first and I am happy with my +50 duplex..:-))

Nice one SC :-)

Thank you SC.....I luv it when a fluke comes together........lol

For tonights game with cable, missed the best move of the evening (22 - 71 ish) so chanced the res @ 74 and have short running from 70, which has to make up for a -17 from previous!

Senators threaten China with tariffs
AFX


WASHINGTON (AFX) - Two U.S. senators urged Beijing Thursday to let China's yuan currency appreciate further, or face the threat of punitive tariffs on Chinese goods.

Sens. Lindsey Graham, R-S.C., and Chuck Schumer, D-N.Y., said they were encouraged by China's decision last week to let the currency appreciate by slightly more than 2% against the U.S. dollar, but expressed concern over a subsequent statement by China's central bank, which warned that there would be no further changes in the currency's valuation.

For more than a decade, China had maintained the yuan pegged at an exchange rate of 8.11 to the dollar. U.S. manufacturers and lawmakers have complained that the rate undervalues the Chinese currency, putting U.S. exporters at a disadvantage. China last week altered its foreign-exchange regime, allowing the currency to appreciate around 2% to 8.28 to the dollar.

Schumer said he and Graham remained optimistic China would let the market play a role in dictating the value of the yuan.

If China doesn't let the currency appreciate further, the senators said they would press ahead with legislation to impose 27.5% tariffs on Chinese goods.

'While the Chinese Central Bank has said that they will not do another fixed valuation in the near future, we trust that the Chinese will allow market forces to work.?But we want to be very clear - our bill is still scheduled to be voted on before the end of the Senate session in October.? If it seems like the Chinese are moving forward - great; if not, we are still ready to vote on our bill,' Schumer said.

The pair shelved the legislation in June after receiving assurances from Treasury Secretary John Snow and Federal Reserve Chairman Alan Greenspan that China was prepared to take action on its currency.



This story was supplied by MarketWatch. For further information see www.marketwatch.com.