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: 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: Federal Reserve releases minutes; New York Fed unwinds corporate bonds.

Interbank. At the end of 2021, most term loans, lines of credit or other debt instruments with variable interest provisions tied to the London Interbank Offered Rate (LIBOR) will need to switch to an alternative benchmark. https://www.telegraphherald.com/magazine-websites/biztimes/finance/article_eb0ab61c-9dfb-5dab-a4d8-30d4713f1c39.html

Interbank. China’s government bonds rallied, sending the benchmark 10-year yield to the lowest level since August, after the government indicated that the central bank could loosen its policy to support the economy. https://www.bloomberg.com/news/articles/2021-07-08/china-s-traders-race-to-buy-bonds-on-policy-easing-signals?sref=oriheOus

Interbank.  Here’s what went wrong with LIBOR. https://www.bloomberg.com/news/videos/2021-06-29/here-s-what-went-wrong-with-libor-video?sref=oriheOus

Interbank. Only half of loan investors believe their instruments have robust fallback language designed to ensure a smooth transition from the London interbank offered rate, according to a recent survey from Barclays Plc. https://www.bloomberg.com/news/articles/2021-06-25/libor-fears-persist-for-loan-market-with-six-months-to-deadline?sref=oriheOus

Interbank. A key gauge of funding conditions in Europe suggests money markets are pricing in an eventual end to the region’s unprecedented liquidity glut. https://www.bloomberg.com/news/articles/2021-07-02/europe-s-money-markets-prepare-for-world-without-unlimited-cash?sref=oriheOus

Interbank. Look for dollar strength into 2022. https://www.bloomberg.com/news/videos/2021-07-08/look-for-dollar-strength-into-2022-ubs-global-wm-s-schnider-video?sref=oriheOus

Board of Governors of the Federal Reserve.  Minutes of the Federal Reserve Open Market Committee. https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20210616.pdf

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. https://www.newyorkfed.org/newsevents/news/markets/2021/20210708

8 July 2021

Interbank Market News Scan: Federal Reserve, foreign exchange, central banks …

28 June 2021

Links to follow ….

Interbank. China is taking another step to loosen its capital controls and in the process is giving onshore investors greater access to a previously hard-to-reach bond market.  https://www.bloomberg.com/news/articles/2021-06-27/how-china-is-cracking-a-window-for-its-bond-investors-quicktake?sref=oriheOus

Interbank. Only half of loan investors believe their instruments have robust fallback language designed to ensure a smooth transition from the London interbank offered rate, according to a recent survey from Barclays Plc. https://www.bloomberg.com/news/articles/2021-06-25/libor-fears-persist-for-loan-market-with-six-months-to-deadline?sref=oriheOus

Foreign exchange. Deutsche Bank AG compensated a Spanish company for losses the firm made after purchasing foreign-exchange derivatives from the German lender, people familiar with the matter said. https://www.bloomberg.com/news/articles/2021-06-28/deutsche-bank-compensates-firm-over-fx-derivatives-mis-sales?sref=oriheOus

Central banks. They spent 2020 uniting to fend off a historic recession, but central banks are slowly starting to take different paths in 2021. https://www.bloomberg.com/news/newsletters/2021-06-28/what-s-happening-in-the-world-economy-peak-central-bank-stimulus?sref=oriheOus

Central banks. Inflation is now an “influencer” of the Fed and the other central banks, but no more than that. The real question is how the central banks will respond to it, if at all, past their public comments. https://seekingalpha.com/article/4436858-central-banks-claim-check

Central banks, Federal Reserve. The Federal Reserve Board on Friday announced it will extend for a final time its Paycheck Protection Program Liquidity Facility, or PPPLF, by an additional month to July 30, 2021. The extension is being made as an operational accommodation to allow additional processing time for banks, community development financial institutions, and other financial institutions to pledge to the facility any Paycheck Protection Program, or PPP, loans approved by the Small Business Administration through the June 30 expiration of the PPP program. https://www.federalreserve.gov/newsevents/pressreleases/monetary20210625a.htm

U.S. Senate Committee on Banking, Housing, and Urban Affairs. Today, U.S. Senator Chris Van Hollen (D-Md.), a member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, and Committee Chairman Sherrod Brown (D-Ohio) applauded the bipartisan House passage of their resolution to repeal the Trump Administration’s so-called True Lender Rule through the use of the Congressional Review Act. This regulation, finalized in the last months of the prior Administration, allows predatory lenders to skirt state laws meant to curb interest rates on loans and opens the doors for these lenders to prey on vulnerable consumers. The legislation now heads to the President’s desk for signature.  https://www.banking.senate.gov/newsroom/majority/house-passes-van-hollen-brown-legislation-to-strike-down-trump-era-rent-a-bank-rule-sending-it-to-the-presidents-desk

U.S. House Committee on Financial Services.  This week, Congresswoman Maxine Waters (D-CA), Chairwoman of the House Committee on Financial Services, gave the following statement on the House floor urging the passage of Senate Joint Resolution 15, a resolution that invalidates the Trump Administration’s “True Lender” rule. https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=408055

Interbank Market News Scan: Canada sees no rush to issue a central bank digital coin …

Links you should follow ….

Foreign exchange. Luis Costa outlines commodity currencies that he is trading. This strategist outlines which currency commodities he’s trading (msn.com)

Foreign exchange. The Bank of Canada is thinking in more concrete terms about how its digital currency might look and work but it does not currently see a strong case for issuing one, a deputy governor said on Wednesday. Bank of Canada does not see currently see strong case for issuing digital currency | Nasdaq

Foreign exchange. After more than a year of slumber, investors are preparing for currency volatility to come roaring back to life. Currency FX Volatility Set for a Comeback on Looming Policy Shifts – Bloomberg

Foreign exchange. A dovish Federal Reserve and accelerating growth abroad are weighing on the dollar, a move that could be a boon for stocks and other assets. Analysis-Floundering dollar falls to bottom of global currency heap (msn.com)

Foreign exchange, cryptocurrency. ‘Bitcoin isn’t even a reliable hedge for risk-off events, let alone inflation shocks. It’s actually highly pro-cyclical…In difficult times, crypto assets don’t go up; they go down.’— Nouriel Roubini. Bitcoin isn’t a currency or financial asset, but ‘looks like a bubble’: Roubini (msn.com)

Foreign exchange rates of interest …

Changes in currency tails comprised of the euro, US dollar, and Canadian dollar and currencies out of the Eastern Caribbean, Dominican Republic, Haiti, and Jamaica remained relatively flat over the last 24 hours. Any tightening of rates on the part of major central banks is expected to have a significant impact on Caribbean currencies thus the purchasing power and cost of remittances sent back to the Caribbean.

Currency PairsRates as of 12:00 pm AST 27 May 2021Rates as of 10:45 am AST 26 May 2021
EUR/XCD3.30073.3055
USD/XCD2.70002.7000
CAD/XCD2.22492.2402
EUR/JMD182.7800181.2040
USD/JMD147.9460148.0130
CAD/JMD122.3780122.8050
USD/DOP56.479956.4454
USD/HTG88.663488.6591
Source: OANDA

Interbank Market News Scan: Banks, prime brokerages. Still Assessing Archegos fallout …

Links of interest …

Banks. The financial watchdog overseeing Danske Bank A/S says the European Union needs to re-examine the limits of client privacy if it’s serious about fighting money laundering and other forms of financial crime. Danske Bank Watchdog Calls for EU Debate on Client Secrecy Rules – Bloomberg

Banks. Foreign demand for a slice of Taiwan’s increasingly profitable companies is threatening to upend the central bank’s decades-old currency management policy. Taiwan Central Banker Says Currency Policy Faces ‘Turning Point’ – Bloomberg

Banks. Credit Agricole SA Chief Financial Officer Jerome Grivet speaks on Bloomberg Television about the bank’s trading performance, earnings and M&A strategy in Italy. The Paris-based lender’s profits jumped 64% to 1.05 billion euros ($1.27 billion) in the first quarter, boosted by a 17% rise in capital markets and investment banking revenue to 708 million euros, beating the highest analyst estimate. Credit Agricole CFO Jerome Grivet on Trading Revenue, Italy M&A, Q1 Earnings: Video – Bloomberg

Banks. Edward Bramson, the activist investor who targeted Barclays Plc, has said that business isn’t a science. But his three-year attempt to force through change at the British bank didn’t show much art either, hence his capitulation on Friday. Edward Bramson Picked a Bad Time to Bet Against Barclays Traders – Bloomberg

Banks. Wall Street firms have urged the Biden administration to ease the industry’s burden in complying with a flood of financial sanctions the U.S. has levied in recent years as a primary tool of foreign policy toward Russia, China, Iran and other adversaries. Banks Seek Biden’s Aid After Trump’s 1,000-Sanctions-a-Year Pace – Bloomberg

Banks, cryptocurrency, CBDC. As the cryptocurrency market continues to skyrocket – hitting a $1 trillion in February to double its market capitalization in just three months – enthusiasts such as Mark Cuban are increasing calls for the world to embrace digital and decentralized money. Cryptocurrencies, the billionaire said, are the future, especially as the world recovers from once-in-a-generation pandemic. Mark Cuban explains why crypto is the future, especially as the world recovers from a generational pandemic (msn.com)

Banks, prime brokerages. As Archegos has caused Credit Suisse to retrench in prime brokerage, it has set off a jockeying for clients by others. Dogecoin Is Up Because It’s Funny – Bloomberg

Banks, prime brokerages. Three years after he left in a leadership shakeup, former Credit Suisse Group AG prime broker head Indrajit Bardhan is returning to clean up his old unit in the wake of its multibillion-dollar losses from botched dealings with Archegos Capital Management. Credit Suisse Lures Back Prime Broker Head to Clean Up Archegos – Bloomberg

Banks, prime brokerages. The litany of setbacks is probably not over. Why foreign banks’ forays on Wall Street have gone wrong—again | The Economist

Foreign exchange rates of interest …

Currency PairsRates as of 6:45 pm EST 9 May 2021Rates as of 10:27 pm EST 6 May 2021Change in pips
EUR/USD1.21611.2060+101
GBP/USD1.39941.3904+90
AUD/USD0.78420.7780+62
USD/CAD1.21301.2154-24
USD/JPY108.6000109.1100-5100
USD/NOK8.20398.3028 -989
USD/CHF0.90050.9077-72 
USD/SEK8.30508.4223 -1,173
USD/MEX19.900020.0860 -1,860
Source: Reuters

Fed Funds and Treasury rates …

Fed Funds.05
Bank prime rate3.25
Fed Funds target rate.25
2-yr Treasury.14
10-yr Treasury1.58
30-yr2.28
Source: Bloomberg