Interbank Market News Scan: The crypto-digital world finds the fiat currency worthless …

30 July 2021

The Takeaway: The crypto-digital world finds the fiat currency worthless …

The past couple posts I have been harping on whether Amazon or Facebook can create a viable digital nation-state.  Right now, I am putting Amazon in lead, but if Facebook can create a more viable transactions-based economy rather than relying on being a pure private data aggregator and reseller, then Facebook may have the potential in the longer run to rival Amazon.

For now, occupants of the digital world are not placing any crypto-monetary value on fiat currencies.  I don’t see this no-value perspective changing any time soon on the part of digital world residents.  For example, according to OANDA data from twelve months ago, USD/ETH was priced at .0031.  Today, the price of USD/ETH is at .0004.  I believe the more closed-loop the digital world can remain, the less the digital world’s demand for fiat currency. 

Holders of cryptocurrency are still interested in holding crypto as an asset versus a medium of exchange for trade even though the rhetoric is quick to describe crypto as a payment system as well. Examples of commercial entities accepting crypto as payment should be discounted by the preference for holding crypto as an asset versus medium of exchange.

On the other hand, I am mindful that on a global basis crypto as a medium of exchange is creeping into consumer mindset with El Salvador’s decision to accept crypto as legal tender.  It is way too early to tell what degree of success crypto will see in the Central American nation.  In the meantime, public policy in the United States is to treat cryptocurrency as a digital asset and until the time comes where legacy nation-states view the digital world as a trade partner, USD/ETH and USD/BTC will be priced at zero for a while.

Alton Drew

For a consultation on any regulatory or legislative discussions or announcements, please reach out to us at altondrew@altondrew.com for information on consultation rates and to reserve an appointment.

Rates reported by the Federal Reserve (Release Date 29 July 2021)

Effective Fed Funds Rate: 0.10%

Discount Window:  0.25%

Prime Bank Rate: 3.25%

3-month Treasury bill: 0.05%

6-month Treasury bill: 0.05%

1-year Treasury bill: 0.07%

Prices

Exchange rates of interest as of 9:49 am EST

Currency pairExchange rate
AUD/USD*0.7371
EUR/USD*1.1884
GBP/USD*1.3965
USD/CAD*1.2434
USD/CHF*0.9061
USD/JPY*109.6500
USD/MXN*19.8480
USD/BTC+0.0000
USD/ETH+0.0004
Sources: *Reuters +OANDA

Interbank Market News Scan: How close is Facebook to becoming a digital nation-state?

The Takeaway: Brokers and traders should pay close attention to how Facebook addresses regulation of Diem

Yesterday I shared some insights about Amazon’s potential for building a digital nation based on the creation of its own digital token.  The company signaled efforts in this area by announcing a search for staff with experience in creating digital currency.  Writing about their efforts naturally led me to thinking about the efforts of another large platform manager, Facebook.

Given over 2 billion subscribers to Facebook’s platform and millions of daily users, The Menlo Park, California-based company seems like another likely candidate for “digital nation” status.  Arguably it is ahead of Amazon in the creation of its own digital currency, the Diem.  But is it ahead of Amazon when it comes to putting in place the transactional environment necessary for a “digital country?”

Facebook’s purported mission, according to its annual report, is to “give people the power to build community and to bring the world closer together.”  Facebook generates almost all of its revenues from advertisement and while it considers Amazon a competitor in the advertisement space, Facebook has not invested in transportation, storage, or distribution systems for goods and services or subscriber content production.  In my opinion, these channels have boosted Amazon’s value as an issuer of digital coins because they represent the underpinnings of a transactional environment.  Transactions are the underpinnings of growth in output and income and while there are notices of items for sale in numerous Facebook groups and advertisement appearing on users’ profiles, Facebook is more of a personal data aggregator than it is a market for trade.

Lastly, what also works against Facebook is its history of data privacy breaches.  Both aisles of Congress have come down on Facebook for its lack of transparency in notifying its subscribers as to how the company uses consumer data.  These privacy concerns have also leaked into Congress’ assessment of how the company’s proposed digital currency would be incorporated into any potential data grabbing strategies.

I believe what is more important to Congress than its rhetoric about consumer protection and privacy is how a digital currency provided by a behemoth digital platform could challenge the United States’ ability as a tax and customs jurisdiction.  Should a significant number of miners, farmers, merchants, and other business entities start using Facebook’s digital currency to exchange among themselves and with Facebook’s end user subscribers, Facebook becomes a new nation-state.

Facebook hopes to have Diem launched by the end of 2021.  What impact the current variation in the corona virus and the ensuing Covid disease will have on deployment is unknown.  Right now, speculators and broker/dealers may not have Diem on their radar, but they should, like Amazon, prepare for a large platform issuing its currency and also determine how Diem should be valued.

For a consultation on any regulatory or legislative discussions or announcements, please reach out to us at altondrew@altondrew.com for information on consultation rates and to reserve an appointment.

Rates reported by the Federal Reserve (Release Date 27 July 2021)

Effective Fed Funds Rate: 0.10%

Discount Window:  0.25%

Prime Bank Rate: 3.25%

3-month Treasury bill: 0.05%

6-month Treasury bill: 0.06%

1-year Treasury bill: 0.08%

Prices

Exchange rates of interest as of 9:02 am EST

Currency pairExchange rate
AUD/USD*0.7381
EUR/USD*1.1802
GBP/USD*1.3826
USD/CAD*1.2543
USD/CHF*0.9162
USD/JPY*110.1800
USD/MXN*20.0290
USD/BTC+0.0000
USD/ETH+0.0005

Sources: *Reuters +OANDA

Interbank Market News Scan: Is Jeff Bezos on the way to building a digital country?

27 July 2021

Links to follow

However, what fewer people are aware of is the way that the app world has transformed the forex industry. Forex trading apps have proliferated in recent years, and it’s easy to see why: these apps offer a chance to keep up to date with the latest events in the market, and make the taking of real-time trading decisions possible. https://techbullion.com/how-foreign-exchange-apps-are-changing-the-trading-industry/

Speculations about Amazon set to accept Bitcoin as a form of payment by the end of the year have been growing, following a job posting for a “Digital Currency and Blockchain Product Lead.” Bitcoin Prices Surge Thanks to Amazon Rumors (yahoo.com)

El Salvador is the first country to declare bitcoin legal tender. But the experiment raises big questions about what will happen next — for bitcoin and the country itself. El Salvador made bitcoin a legal currency. Now it gets interesting (cnbc.com)

Six things that happened in crypto this past week. Crypto news: bitcoin rally, Amazon digital currency expert, tether probe (cnbc.com)

The Takeaway: Is Jeff Bezos on the way to building a digital country?

There is some buzz about possible acceptance by Amazon of bitcoin as digital payment for its goods and services.  The speculation is in part a result of Amazon’s recruitment of a digital currency and blockchain product lead.  However, Amazon’s global delivery platform combined with its own digital token could take Amazon to heights higher than its New Shepard rocket.  Futures commission merchants and retail foreign exchange dealers (brokerages and brokers) should envision such a digital token as a significant future foreign exchange trade.

How soon this trade comes about depends on how quickly Amazon can design, test, and deploy a token.  I believe enough of a platform necessary for supporting a digital token is already in place.  Let us start with an important consumer item: food. 

A digital country will need a food distribution system to sustain it.  Amazon’s purchase of Whole Foods in 2017 gave the company at the time of the acquisition a retail footprint and distribution network valued at $14 billion.  With its goal of being “the Earth’s most customer-centric company”, encouraging farmers and other food processing vendors to use its digital tender creates currency agents that can trade that valuable token with other commercial entities. 

In addition to food distribution, lying at the heart of the Amazon economy are the transactions conducted on its network.  Merchants of all stripes trade on Amazon’s network.  Amazon’s attempts at facilitating trade by creating an online space for vendors who would otherwise be frozen out of a traditional brick and mortar business due to costs are generating revenues for the company and enhancing its brand as merchant centric.  Like farmers and food processors, merchants who choose to use an Amazon token become currency merchants for the company by turning around and trading the tokens into consumer, other retailer, and wholesale markets.

Lastly, pushing up Amazon’s value further will be its data and information services game.  Amazon’s cloud services and its electronic devices such as Kindle and Alexa collect data and make that data available for sale.  Allowing consumers, governments, and commercial enterprises to purchase Amazon data products and output with its tender will only help increase a digital token’s value.

It is tempting to say that there is a way to go before Amazon comes up with a digital token of their own to rival bitcoin or other cryptocurrencies, but with technology, “long way off” is around the corner.

For a consultation on any regulatory or legislative discussions or announcements, please reach out to us at altondrew@altondrew.com for information on consultation rates and to reserve an appointment.

— Alton Drew

Rates reported by the Federal Reserve (Release Date 26 July 2021)

Effective Fed Funds Rate: 0.10%

Discount Window:  0.25%

Prime Bank Rate: 3.25%

3-month Treasury bill: 0.05%

6-month Treasury bill: 0.05%

1-year Treasury bill: 0.07%

Prices

Exchange rates of interest as of 1:39 am EST

Currency pairExchange rate
AUD/USD*0.7381
EUR/USD*1.1802
GBP/USD*1.3826
USD/CAD*1.2543
USD/CHF*0.9162
USD/JPY*110.1800
USD/MXN*20.0290
Source: *Reuters

Interbank Market News Scan: Forex market dealers prepare for Fed monetary policy announcement ….

24 July 2021

Monetary Policy News

Markets prepare for Federal Reserve policy decision

The Board of Governors of the Federal Reserve System meet on 27 & 28 July 2021 for their policy meeting, with a press conference scheduled on 28 July after the 2:00pm release of its decision on the Federal Funds and Discount Window rates.  While the Federal Reserve does not directly regulate rates set in the interbank market, the fed funds and discount window rates set the environment for rate determination in the interbank markets.

While the Federal Reserve maintained its policy of board members not releasing any statements during the week leading up to its policy announcement, the equity markets have been signaling an expectation that the central bank will continue its policy of purchasing $120 billion a month in U.S. Treasurys and agency backed debt.  The past several weeks has seen increased discussions in Congress and the media about increasing prices for food, energy, automobiles, and other goods and services.  Traders and dealers will be paying close attention to any language that signals an increase in the costs for money and/or changes in the supply of money.

For a consultation on any regulatory or legislative discussions or announcements, please reach out to us at altondrew@altondrew.com for information on consultation rates and to reserve an appointment.

Rates reported by the Federal Reserve (Release Date 23 July 2021)

Effective Fed Funds Rate: 0.10%

Discount Window:  0.25%

Prime Bank Rate: 3.25%

3-month Treasury bill: 0.05%

6-month Treasury bill: 0.05%

1-year Treasury bill: 0.07%

Prices

Exchange rates of interest as of 1:15 pm AST

Currency pairExchange rate
AUD/USD*0.7364
EUR/USD*1.1771
GBP/USD*1.3746
USD/CAD*1.2556
USD/CHF*0.9190
USD/JPY*110.5400
USD/XCD+2.7000
USD/NGN+411.1590
USD/MXN*20.0430
Sources: *Reuters +OANDA

Interbank Market News Scan: Assessing the Legal and Political “Meteorology” of Foreign Exchange

The Morning Takeaway: Assessing the Legal and Political “Meteorology” of Foreign Exchange

Humans have no need to come in contact with each other but for the exchange of value.  How the value deemed from interaction is determined will be based on an individual assessment of how much benefit is to be gleaned from what another has to exchange.

Determining the benefit of what another party has to exchange means incurring costs for gathering information.  The more cogent and clear the better.  Efforts are optimized and the information gathering becomes efficient.  Understanding the environment producing the information is important.  The environment places parameters on any information obtained.  The environment within which the information is produced may lack characteristics necessary for producing the clearest information possible.

The value that is being exchanged also contains information about the environment it is coming out of.  Take corn or any other agricultural commodity.  For optimal growth, the environment that produces corn should provide a certain quality of soil, nutrients, water, and weather to create a quality yield.  What is yielded should be able to provide you with information on the quality of soil, nutrients, water, and weather from whence the yield came. 

This same approach should be taken to another commodity, currency.  The “soil’ for this commodity is a nation’s central bank and to a lesser extent the commercial banks that act as distribution channels for the currency.  The “soil” is impacted by the “weather” and “climate” generated by the level of transactions occurring within multiple markets in the political economy.  These transactions deliver “rain” onto the soil and impact the yield in currency released into the political economy’s blood flow.  And just like a corn crop can provide the farmer or the end user information about the environment that spawned the yield, so to can currency, or specifically, currency price movements, provide the trader with information about the central bank environment.

For the trader, it is important to assess the legal and political “meteorology” of the central bank environment.  Without these assessments, the trader, whether purchasing currency tails for speculation or as part of an international business transaction, risks not capitalizing on the yields that foreign exchange can bring about.

For a consultation on any regulatory or legislative discussions or announcements, please reach out to us at altondrew@altondrew.com for information on consultation rates and to reserve an appointment.

Exchange rates of interest as of 11:45 am AST

Currency pairExchange rate
AUD/USD*0.7352
EUR/USD*1.1794
GBP/USD*1.3714
USD/CAD*1.2739
USD/CHF*0.9192
USD/JPY*109.3100
USD/XCD+2.7000
USD/NGN+410.9850
USD/MXN*20.0353
Sources: *Reuters +OANDA

Rates reported by the Federal Reserve (Release Date 16 July 2021)

Effective Fed Funds Rate: 0.10%

Discount Window:  0.25%

Prime Bank Rate: 3.25%

3-month Treasury bill: 0.05%

6-month Treasury bill: 0.05%

1-year Treasury bill: 0.07%

Interbank Market News Scan: What traders need to know about politics …

What Traders Need to Know About Politics: Capital Hates Labor

Regurgitating textbook definitions of economic growth i.e., growth in employment or gross domestic product, etc., only throws you off the mark leaving you frustrated as you ask yourself, “Why are more people being left behind while others see growth in their stock portfolios?”

Economics has never been about growth in employment. Economics is about managing capital with the appropriate amount of labor and technology such that asset values grow. It means pushing the envelope on returns to capital by raising prices so that when discounted by some rate, the present value of the asset can increase thus increasing the value of an individual’s portfolio so that they can leverage the portfolio as collateral for borrowing money at low rates and buying bonds and stocks generating a yield greater than the interest they borrowed at.

In short, today’s economics is about optimizing the carry trade.

This approach to economics was exposed in 2007 and 2008. If this growth in income and asset value (the only inflation that matters) can be achieved without hiring another soul, the wealthy would be happy.

The politician’s job is to distract the low and middle-income populace with narratives of “attacks on democracy” “diversity and inclusion” and “climate change.” Throw in “gun violence” policy and attacks on the big banks ala Elizabeth Warren and Bernie Sanders and the masses really keep their eyes off the ball.

The politicians that are shedding crocodile tears over today’s inflation figures are either ignorant as to true economics or are putting on a show scripted by their supporting political action committees in order to throw the electorate off of the scent. Needless to say, I think it is the latter.

So, when your favorite politicians are telling you that they are looking out for your economic well-being by offering you $300 tax credits and promising you that they will beat up on the banks that are raising your interest rates on the adjustable-rate mortgage you foolhardily took out or dragging supermarkets into a hearing for raising the price on your T-bone steaks, ignore them. Their job is to ensure the distraction by cheerleading the greatness of their fiscal policies that eventually result in higher taxes or their social programs purposefully designed to be effective no more than eighteen months, assuming they are effective at all….

Meanwhile, replace fluffy concepts such as “economy” and “fiscal policy.” Accept that “socialism” and “capitalism” are policy terms designed more to divide, conquer, and garner votes versus helping put food on your table. Learn to accept that “capital” despises “labor” and her goal is to exterminate you or relegate you to an Andrew Yang universal basic income scheme. Stop repeating what you’ve read in a textbook. All lies. Either you have something of high value to trade for low value currency or you don’t. That is as “economy” as you need to get.

Exchange rates of interest as of 9:52 am AST

Currency pairExchange rate
AUD/USD*0.7422
EUR/USD*1.1793
GBP/USD*1.3804
USD/CAD*1.2593
USD/CHF*0.9182
USD/JPY*110.1900
USD/XCD+2.7000
USD/NGN+409.8540
USD/MXN*19.8603
Sources: *Reuters +OANDA

Rates reported by the Federal Reserve (Release Date 15 July 2021)

Effective Fed Funds Rate: 0.10%

Discount Window:  0.25%

Prime Bank Rate: 3.25%

3-month Treasury bill: 0.06%

6-month Treasury bill: 0.05%

1-year Treasury bill: 0.08%

Interbank Market News Scan: Federal Reserve Board chairman appears before the U.S. Senate banking committee …

15 July 2021

Federal Reserve Board chairman continues testimony before Congress.

Federal Reserve Board chairman Jerome Powell is expected today to share with the U.S. Senate Committee on Banking, Housing and Urban Affairs the same testimony shared yesterday with the U.S. House Committee on Financial Services.

Mr Powell, while acknowledging growth in the economy and the threat of increasing prices, did not indicate any changes in the Federal Reserve’s current asset purchase program.  The Federal Reserve will maintain its purchase of Treasury securities and agency mortgage-backed securities totaling $120 billion a month.  

For a consultation on any regulatory or legislative discussions or announcements during today’s hearing, please reach out to us at altondrew@altondrew.com to reserve an appointment.

Exchange rates of interest as of 10:30 am AST

Currency pairExchange rate
AUD/USD*0.7448
EUR/USD*1.1812
GBP/USD*1.3854
USD/CAD*1.2520
USD/CHF*0.9143
USD/JPY*109.9600
USD/XCD+2.7000
USD/NGN+410.5130
USD/MXN*19.9260

Sources: *Reuters +OANDA

Rates reported by the Federal Reserve (Release Date 14 July 2021)

Effective Fed Funds Rate: 0.10%

Discount Window:  0.25%

Prime Bank Rate: 3.25%

4-week Treasury bill: 0.05%

3-month Treasury bill: 0.05%

6-month Treasury bill: 0.06%

1-year Treasury bill: 0.08%

Interbank Market News Scan: Powell to deliver testimony before Congress on monetary policy …

14 July 2021

Federal Reserve chairman today speaks on state of monetary policy.

Federal Reserve Board chairman Jerome Powell today will share with Congress his outlook on monetary policy as the United States economy continues to pull itself out of the economic doldrums imposed on it by the Covid-19 pandemic.  Mr Powell will share his observation that as the American economy continues to move toward levels of pre-pandemic economic performance, it will climb through transitory periods of inflation.  Increases in consumer prices may primarily be due to restraints on supply due in part to stressed supply chains.

Mr Powell will testify that the Federal Reserve is still focused on its long-term inflation goal of two percent.  Mr Powell will also note that asset valuations are increasing which in turn is feeding risk appetite amongst investors.  Mr Powell will also advise Congress that the Federal Reserve will continue to maintain its current policy of purchasing Treasury securities and agency mortgage-backed securities currently amounting to $120 billion per month until labor market and other economic factors such as stable prices improve.

Mr Powell’s semi-annual monetary policy report to Congress is submitted pursuant to Section 2B of the Federal Reserve Act. The monetary policy report did not go into any detail regarding international trade or exchange rates.

For a consultation on any regulatory or legislative discussions or announcements during today’s hearing, please reach out to us at altondrew@altondrew.com to reserve an appointment.

Exchange rates of interest as of 12:15 pm AST

Currency pairExchange rate
AUD/USD*0.7478
EUR/USD*1.1819
GBP/USD*1.3879
USD/CAD*1.2454
USD/CHF*0.9163
USD/JPY*110.1200
USD/XCD+2.7000
USD/NGN+410.3770
USD/MXN*19.9560
Sources: *Reuters +OANDA

Rates reported by the Federal Reserve (Release Date 13 July 2021)

Effective Fed Funds Rate: 0.10%

Discount Window:  0.25%

Prime Bank Rate: 3.25%

3-month Treasury bill: 0.05%

6-month Treasury bill: 0.06%

1-year Treasury bill: 0.07%

Interbank Market News Scan: Federal Reserve Bank of New York releases consumer survey …

12 July 2021

Links to follow …

Federal Reserve Bank of New York. The Federal Reserve Bank of New York’s Center for Microeconomic Data released the June 2021 Survey of Consumer Expectations, which shows an increase in the median inflation expectations at the short-term horizon, while inflation expectations at the medium-term horizon remained unchanged. Consumers’ Short-term Inflation, Income, and Spending Expectations Continue to Rise – FEDERAL RESERVE BANK of NEW YORK (newyorkfed.org)

Bank of International Settlements. “We have learnt that deep recessions, especially if accompanied by severe financial distress, may have long-lasting effects on potential output, in particular through a reduction in the speed and quality of capital increase.” — Ignazio Visco. Ignazio Visco: Introductory remarks – Annual Conference of the Global Forum on Productivity (bis.org)

Exchange rates of interest as of 1:00 am AST

Currency pairExchange rate
USD/XCDXCD 2.7000
USD/MXNMXN 19.8943
USD/JMDJMD 149.5790
USD/DOPDOP 56.5778
USD/HTGHTG 92.2640
USD/NGNNGN 409.9330
USD/GHSGHS 5.9082
USD/INRINR 74.3350
Source: OANDA

No interbank market related legal news to report …

Interbank Market News Scan as of 3:01 pm AST; foreign exchange, interbank

11 July 2021

Links to follow ….

Interbank. Biden issues executive order addressing bank mergers, competition. Executive Order on Promoting Competition in the American Economy | The White House

Foreign exchange. The first country to get hit by the pandemic has become the first global economy to stumble as the world begins to heal, pushing investors to reconsider where China fits on the old-fashioned continuum of emerging and developed markets. China’s Easing Forces Traders to Rethink How They Label Markets – Bloomberg

Federal Reserve Bank of New York. The Federal Reserve Bank of New York today announced that the Secondary Market Corporate Credit Facility (SMCCF) will begin gradual sales of its corporate bond holdings on July 12, 2021. The New York Fed also released an updated set of Frequently Asked Questions regarding the sales of these assets. New York Fed Announces the Start of Secondary Market Corporate Credit Facility Corporate Bond Sales on July 12 – FEDERAL RESERVE BANK of NEW YORK

Exchange rates of interest as of 3:00 pm AST

Currency pairExchange rate
USD/XCDXCD 2.70
USD/MXNMXN 19.8440
USD/JMDJMD 149.3260
USD/DOPDOP 56.7350
USD/HTGHTG 92.2640
USD/NGNNGN 409.5000
USD/GHSGHS 5.8993
USD/INRINR 74.3350
Source: OANDA