Will we see 0% for the Fed?
Will the Fed really be offering free money in the coming months? Some think so. JP Morgan is predicting that the Fed rate will be cut to 0% in the coming two months, slowly inching down in an effort to boost the U.S. economy.
Right now, there is some worry that deflation is about to set in, harming the U.S. economy, and inflation is likely to be used as a counter-strike. However, things may not work out perfectly for the Fed if this happens, reports Bloomberg:
``Taking the target rate to zero percent would not be costless for the Fed,'' Feroli said. Public confidence may drop ``if there is a perception that the Fed has `run out of ammo.'''
Indeed, dropping the Fed rate to 0% might be taken as a sign of defeat. And besides, what can the Fed do beyond that? Sure, it's possible to go negative and start paying people to take money, but that's getting a little extreme (and the scenario is unlikely).
At any rate, the Fed isn't the only country that's getting lower in terms of interest rate. The Swiss National Bank just cut its rate by 100 basis points, and both the European Central Bank and the Bank of England are conceding that they may cut rates.
And don't forget the Bank of Japan. It's practically at 0% already, with a rate of 0.3%.See Also
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The currency trading story changes regularly
One of the defining features of the FX market is volatility. When currency trading, it is important to remember that the story can change rapidly. While this is true of all financial markets, the liquidity of the FX market makes it even more pronounced.
Keep in mind that a currency that may be gaining in the morning may be losing by the afternoon. And because the FX market is a 24 hour market, things can change again by evening and again by nighttime and then again by early morning.
Before engaging in forex trading, it is important to make sure that you understand how the market works, and that you can handle the risk involved.See Also
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Surprise rate cut sends Swiss franc lower in forex trading
In currency trading, the Swiss franc is heading much lower, thanks to a surprise rate cut from the Swiss National Bank. The central bank in Switzerland made a dramatic cut of 100 basis points, in an effort to help stimulate the economy.
Like many other countries, the Swiss National Bank participated in a coordinated rate cut not too long ago. On that occasion, the bank cut rates by 50 basis points. However, it is apparent that Swiss monetary policy makers feel that they can do more to support the Swiss economy.
As one might expect, the Swiss franc is markedly lower in forex trading, especially against the U.S. dollar.See Also
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Euro forex trading forecast
Even though stock futures were pointing lower this morning, there has been a bit of a bounce this morning on the U.S. stock market, and that is helping the euro in FX trading on the currency market.
The euro forex trading forecast might be looking up a bit as we progress, making an attempt to break out of the down trend that it has been stuck in for about a month.
Optimism for the euro comes from hope that there might really be a recovery for stocks around the corner, reports Bloomberg:
“The euro advance has been triggered by the bounce in the U.S. equity futures after the SNB cut,” said Adam Cole, the head of global foreign-exchange strategy in London at Royal Bank of Canada. Currencies “are taking their lead from stock movements at the moment,” he said.
Of course, in the current financial climate, where confidence can be shattered by the smallest thing, there is no telling when the euro forex trading forecast will turn downward again.See Also
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Aussie, kiwi drop in currency trading
High yield currencies are struggling right now on the FX market. The Aussie and the kiwi -- the down under currencies -- are prime examples of what can happen in currency trading when risk aversion and global recession set in.
For the most part, high yield currencies are those that benefit when risk appetite is strong. Because they have a higher yield, lower yielding currencies are borrowed in order to fund their purchase. The forex trader can then make money on the difference in interest yields.
This maneuver is known as the carry trade, and it is considered risky. When confidence in the market is falling, such risky moves are the first abandoned, and high yielding currencies no longer benefit from them.
Aussie and kiwi are experiencing this in currency trading right now, and both have fallen quite far on the FX market since the beginning of the year.See Also
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