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: 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: The Caribbean, foreign exchange, and interdealer …

Links you should follow …

Interbank. The overnight Shanghai Interbank Offered Rate (Shibor), which measures the borrowing cost of China’s interbank market, decreased 4 basis points to 2.187 percent Tuesday.  http://www.china.org.cn/china/Off_the_Wire/2021-06/01/content_77540607.htm

Interbank. The Korea Interbank Offered Rates (KORIBOR) as posted by Yonhap Infomax, the financial news and information arm of Yonhap News Agency, at 11:00 a.m. https://en.yna.co.kr/view/AEN20210601004000320

Interbank. Chile’s peso outperformed Latin American peers on Monday as prices for the country’s top export, copper,rose on supply concerns, while the Peruvian sol fell ahead of final round presidential elections on June 6. https://www.reuters.com/article/emerging-markets-latam/emerging-markets-chiles-peso-outperforms-perus-sol-drops-ahead-of-elections-idUSL2N2NI1E4

Interdealer. Dealers saw some buying on the first day of June, perhaps motivated by the Bank of Japan not making any changes to its bond buying plan, but flows in the interdealer market were very light. With no JGB auction or BoJ bond buying operations scheduled for today, the market may be waiting for the US bond market to reopen after yesterday’s Memorial Day holiday and provide near-term direction to JGBs. https://www.nasdaq.com/articles/jpn-govts-close%3A-jgbs-do-little-all-day-interdealer-market-very-quiet-2021-06-01

Foreign exchange. China’s central bank said on Monday that it would raise the amount of money that financial institutions must set aside as reserves for their foreign exchange deposits, in the latest move to curb the yuan’s recent rapid appreciation. https://www.scmp.com/economy/china-economy/article/3135520/chinas-central-bank-moves-slow-yuans-rise-concerns-rise-over

Foreign exchange. The dollar hovered near five-month lows on Tuesday as investors waited for euro zone inflation data and a U.S. manufacturing survey, while the yuan steadied after China’s central bank took steps to limit its appreciation. https://www.cnbc.com/2021/06/01/forex-markets-dollar-us-federal-reserve-british-pound.html

Foreign exchange rates of interest: Eastern Caribbean, Guyana, Trinidad and Tobago …

Currency PairsRates as of 10:30 am AST 1 June 2021
EUR/XCD3.2959
GBP/XCD3.8319
USD/XCD2.7000
CAD/XCD2.2364
EUR/TTD8.1434
GBP/TTD9.4676
USD/TTD6.6710
CAD/TTD5.5257
EUR/GYD245.1550
GBP/GYD285.0200
USD/GYD200.8310
CAD/GYD166.3500
Source: OANDA

Interbank Market News Scan: Substantive revolution. New currency …

The Takeaway …

The only revolution of any consequence is a bottom-up revolution. I’m not talking about changing the ass that sits in a seat in an oval office or legislative branch. Under that scenario you are merely changing personalities that run problematic institutions.

Let’s face it. Most voters don’t want change. Voters are one step above an audience at the Apollo asking for the MC to bring out the hook to cart the current act of stage. That’s not change. That’s merely comic relief.

A bottom-up change means no representative government. It means getting rid of the delusion that everyone has an opportunity merely because they exist. On the contrary, bottom up means each household is forced to create their own economic value and trade it with households that generate their own independent economic value.

Whereas under the current corporate-capitalism model, a small handful of investors create a business model and hire you to conduct some limited task that expires when that handful of investors deems it expired, it is the individual household, the one that masters technology and serves the needs of other value generating households, that controls its economy by trading goods and services that it creates.

No top-down control. Bottom up and horizontal. An organic system that weeds out those whose only claim to economic fame is due to a corporation giving them a job or some government institution bailing them out in exchange for a vote.

The bottom-up system, fortunately, is already here. Nascent, yes, but emerging steadfastly and preparing to wipe out, without mercy, those who hope that whiny calls for how much their lives matter can guarantee them a few more safety pins for their diapers.

The writing has been on the wall. The ink is beginning to dry.

For the independent, “severe libertarian” types, it will be business as usual. They have always understood that building “wealth” on a phony fiat currency has never been the way to go and that leveraging a bottom-up revolution means controlling and issuing a currency that is substantive.

No. This revolution won’t be televised …. but won’t be a surprise.

Links you should follow …

Interbank. China’s interbank money market transactions shrank in April, with the transaction volume declining 22.19 percent year on year to stand at 95.5 trillion yuan (about 14.9 trillion U.S. dollars), according to the People’s Bank of China (PBOC). http://www.china.org.cn/china/Off_the_Wire/2021-05/29/content_77535245.htm

Interdealer. EU antitrust regulators on Friday fined the world’s largest interdealer broker ICAP 6.45 million euros ($7.9 million) for taking part in several yen interest rate derivatives https://www.reuters.com/article/us-eu-icap-cartel-idUSKCN2D9143

Foreign exchange. Zambia’s central bank increased the amount of foreign exchange that people can buy or sell daily in an effort to draw business away from the parallel market, Governor Christopher Mvunga said. https://www.bloomberg.com/news/articles/2021-05-27/zambia-lifts-foreign-exchange-limits-to-counter-parallel-market?sref=oriheOus

Remittances. With the rebound in economic growth, remittances to low-middle-income countries will increase 2.6 percent in 2021 to 553 billion dollars, the World Bank informed today. https://www.plenglish.com/index.php?o=rn&id=67893&SEO=global-economic-rebound-will-increase-remittances

Remittances. The Federation of Pakistan Chambers of Commerce and Industry’s Businessmen Panel Chairman Mian Anjum Nisar has expressed the hope that Pakistan would receive record remittance inflows of up to $29 billion this year, as the government and central bank initiatives to facilitate overseas workers have started giving positive results amidst worldwide corona epidemic challenges. https://www.brecorder.com/news/40096468/remittances-only-hope-to-support-account-balance

Banks. Tensions between Deutsche Bank and the Federal Reserve are rising.  In recent weeks, the Fed has told Deutsche Bank to address flaws in its anti-money-laundering controls, according to a report by the Wall Street Journal. https://www.msn.com/en-us/money/markets/the-fed-is-reportedly-weighing-fines-for-deutsche-bank-over-the-banks-insufficient-anti-money-laundering-controls/ar-AAKxBBT

Interbank Market News Scan at 2:45 pm GMT

Links you should follow …

Interbank, interdealer. Interbank trading activity accounted for more than 80% of the US$3.1trn in interest-rate derivatives that left the UK for the US and the European Union in the wake of Brexit, according to IFR calculations using IHS Markit data. Interbank trading drives post-Brexit swap migration | IFR (ifre.com)

Interbank, interdealer. Paul Houston, Global Head of FX Products, CME Group, recently caught up with Traders Magazine to discuss the drivers causing change in the FX derivatives market, what CME Group has been doing to alleviate the pain points from these changes, and the exchange’s future plans.  FX Futures and Options Innovation in Focus – Traders Magazine

Interbank, interdealer. US exchange group ICE has invested in FinTech and municipal bond network BondLink to develop infrastructure servicing in the $4 trillion market. ICE invests in US municipal bond network BondLink (thetradenews.com)

Interbank, China. The following are the central parity rates of the Chinese currency renminbi, or the yuan, against 24 major currencies announced on Monday by the China Foreign Exchange Trade System. Market exchange rates in China — May 24 – China.org.cn Interbank, Pakistan. The Pakistani rupee depreciated 34 paisas against the United States (US) dollar in the interbank currency market on Monday. Rupee weakens against US dollar (arynews.tv)

Foreign exchange rates of interest …

Currency PairsRates as of 2:45 pm GMT 24 May 2021Rates as of 1:43 pm GMT 21 May 2021
GHS/EUR0.14150.1417
GMD/EUR0.01590.0159
NGN/EUR0.00200.0020
SLL/EUR0.00010.0001
KES/EUR0.00770.0075
RWF/EUR0.00080.0008
ZAR/EUR0.05870.0584
MZN/EUR0.01360.0136
XCD/EUR0.30400.3035
Source: OANDA