Interbank Market News Scan: The ECB philosophy behind a central bank digital currency …

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Interbank, European Central Bank. Fabio Panetta, member of the executive board of the European Central Bank, presented on the feasibility and deployment of a central bank digital currency.  The main goal of a central bank digital currency, according to the presentation, should be to maintain “public access and full usability of central bank money in a world where consumers and firms are turning increasingly toward electronic payments.”

Of interest to foreign exchange traders in regards to a central bank digital currency is the central bank’s concern about maintaining the convertibility of private money to central bank cash, future cross-border, cross-currency possibilities including making cross-border payments easier.

Since central bank digital currencies are still in the nascent stage, especially in the United States, the concerns and possibilities are still a way off but should be on the minds of currency traders.

Traders should contact their brokers for more information on how foreign exchange rates may react to events described in the above blog post.

Interbank, Federal Reserve. Federal Reserve System governor Michelle Bowman warned of housing market generated inflation yesterday during remarks before a Women in Housing and Finance public policy luncheon.  Governor Bowman noted significant increases in home prices since 2020 as well as increased prices in the rental markets.

Foreign exchange traders should take note of the temporal nature of inflation overall.  Governor Bowman notes that shortages in labor, land lots, and materials have been fueling housing supply and likely supporting the higher prices being seen in the markets.  Because housing is a large component of the American economy, higher housing prices are fueling inflationary pressures.  But while Governor Boman did not use the term “transitory”, her remarks did introduce at least two factors that may limit the duration of higher prices: the aforementioned supply issues and the expiration of forbearance on mortgage payments.  Traders should be aware that as supply constraint on labor and material evaporate, increases in housing supply may drive down prices in the longer run.  Also, the expiration of forbearance and other stimulative measures may result in lower housing prices as well.

Traders should contact their brokers for more information on how foreign exchange rates may react to events described in the above blog post.

Disclaimer: The above is provided for informational purposes and should not be construed as financial or legal advice or as creating an agreement to provide financial or legal advice.

Alton Drew

9.11.2021

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