Interbank Market News Scan: Bank of England throws shade on Russian currency listing.

Interbank, Russia, ruble. The Bank of England said on Thursday it would cease publishing the rouble’s exchange rate against sterling and the U.S. dollar with immediate effect after the Russian currency slumped to a record low. See article here. Source: Reuters.

Interbank, Pakistan, rupee. “The Pakistani Rupee (PKR) continued to struggle against the US Dollar (USD) and posted losses in the interbank market today. It lost 21 paisas against the greenback after hitting an intra-day low of Rs. 177.7 against the USD during today’s open market session.” See article here.

EUR/USD=1.1107

GBP/USD=1.33369

USD/CAD=1.26908

USD/MXN=20.6689

USD/NGN=415.562

USD/GHS=6.78353

USD/INR=75.6115

USD/JPY=115.293

USD/CNY=6.3139

USD/BTC=0.00002

Source: OANDA

Dollar Index: 97.79

Source: MarketWatch

Interbank Market News Scan: China’s overnight bank rate decreases; Ukraine’s hryvnia shows strength; Bitcoin strengthens.

Interbank, China. “The overnight Shanghai Interbank Offered Rate (Shibor), which measures the borrowing cost of China’s interbank market, decreased 4.3 basis points to 2.112 percent Monday.” See article here. Source: China.org.cn

Interbank, Pakistan. “Pakistani rupee continued to rise against the US dollar in the inter-bank market on Monday due to positive sentiments generated by the release of a $1 billion tranche by the International Monetary Fund (IMF).” See article here. Source: GeoNews

Interbank, Bank of England, inflation. “Almost certainly, 2022 will also see the most above-target inflation numbers since that change. The Bank will be heavily criticised and proposals will be made for reform. What has gone wrong?” See article here. Source: The Critic

Foreign exchange, National Bank of Ukraine. “Last week the hryvnia exchange rate has somewhat stabilized amid a decrease in rising demand for currency and increase in supply of currency, the press service of the National Bank of Ukraine (NBU) wrote on Facebook.” See article here. Source: Ukrinform

Foreign exchange rates of interest …

EUR/USD=1.1451

GBP/USD=1.3527

USD/MXN=20.667

USD/GTQ=7.5163

USD/NGN=415.7

USD/GHS=6.3313

USD/VND=22,646.8

USD/JPY=115.191

USD/INR=74.497

USD/BTC=0.00002

USD/ETH=0.00034

Source: OANDA

DXY=95.58 Source: MarketWatch

Interbank Market News Scan: Bank of England raises its policy rate to 0.5%, sees inflation at 7%.

“The UK economy continues to recover. In November last year, economic activity was back to where it was before the pandemic. Since then, the spread of Omicron meant people spent less. But as the number of new cases falls, we expect spending to go up again.

The number of people out of work is going down. The unemployment rate is only slightly higher than it was before the start of the pandemic.

Inflation (the pace of price rises) has risen above our 2% target. Prices rose by 5.4% last year.

Higher energy prices is one of the main reasons for this. Large increases in oil and gas prices have pushed up petrol prices and utility bills.

Higher prices for goods that we buy from abroad have also played a big role. As economies reopened around the world, people started to buy more goods. Some businesses struggled to meet this extra demand, held back by, for example, shortages of materials and workers. That pushed up their costs and led to higher prices for consumers.

These effects are likely to continue pushing inflation up in the coming months. We expect inflation to rise to around 7% in the spring.

We expect inflation to fall back from the middle of this year. We don’t expect that energy prices will continue to rise as fast, and the shortages that are currently making it difficult for businesses to make their products should ease. We expect inflation to be close to our target in around two years’ time.

We have raised the official interest rate we set, known as Bank Rate, to 0.5% to support inflation returning to our 2% target.  We may need to raise interest rates somewhat further.  Our job is to ensure that inflation returns to our target in a sustainable way.”

Source: Bank of England

3 February 2022

Interbank Market News Scan: Bank of England prepares to announce its policy rate. ADP sends labor market scare.

Legal/Regulatory/Political Events

On 28 January 2022, the Commodity Futures Trading Commission charged five individuals and five firms with fraud in foreign exchange trading. You can find the complaint and press release here. The individuals in the complaint are accused of using the website ROFX.net to defraud forex investors of approximately $58 million. To reserve a consultation on this complaint, please contact us at altondrew@gmail.com.

Interbank, Bank of England. The Bank of England will announce its official bank rate on 3 February 2022. The rate for interbank lending is currently .25%. It is up from the December 2021 rate of .1%. Pre-pandemic, the rate was .75% from August 2018 to March 2020. The BOE reports that the United Kingdom’s current rate of inflation is 5.4%. See bank rates here. Source: Bank of England.

Interbank, European Central Bank. The European Central Bank will hold a press conference on 3 February 2022 at 14:30 CET (8:30 EDT). The current bank rate is at .25% and the ECB reports inflation at 5.1%. Source: European Central Bank.

Interbank, Bank of Japan. Today, the Bank of Japan releases its monthly monetary base report. The BOJ reports that its monetary base has increased 15.9% between 2021 and 2020. Source: Bank of Japan

Interbank, ADP. “Privately run U.S. businesses reduced employment by 301,000 jobs in January –- the worst reading since the start of the pandemic— as a record omicron wave kept people out of work and delayed hiring plans.” — MarketWatch

Foreign exchange rates of interest as of 9:00 am EDT

USD/INR=74.6518

USD/JPY=114.83

USD/VND=22,646.8

USD/GHS=6.2036

USD/NGN=414.958

USD/GTQ=7.5035

USD/MXN=20.5791

USD/BTC=0.00003

USD/ETH=0.00036

GBP/USD=1.3485

EUR/USD=1.1251

Source: OANDA

Interbank Market News Scan: Bank of England to announce interest rate targets today

Interbank, central bank, Bank of England. At 12 pm GMT (8:00 am EST), the Bank of England (BOE) releases its monetary policy report today including its target interest rates.  The current bank rate is set at 0.1%.  The bank rate determines the interest rates the BOE pays to commercial banks which in turn impacts rates paid by commercial bank borrowing customers.  This rate is important to traders because it provides valuable information that can be used to determine changes in inflation and yields on government bonds which in turn provides the trader with insights as to where foreign exchange rates will move.  

The BOE’s current inflation target is 2.0%, but actual inflation is running at 3.1%.  Since November 2009, the BOE has purchased £895 million in corporate and government bonds as part of its quantitative easing program.  QE is intended to help lower interest rates and stimulate growth in the British economy.

Traders should contact their brokers for more information on how BOE’s interest rates decision may move foreign exchange rates.

Interbank, central bank, Federal Reserve.  Yesterday, the Board of Governors of the Federal Reserve System announced that its federal fund and discount window rate target would remain between 0-.25%. In addition, the Federal Reserve will begin to reduce later this month its monthly purchases of US Treasury bonds and agency mortgage-backed securities.  It will reduce its monthly purchase of US Treasurys from $80 billion to $70 billion.  It will reduce its monthly agency mortgage-backed securities from $40 billion to $35 billion.

The Federal Reserve asset purchases were designed primarily to keep interest rates and stimulate the economy during the COVID pandemic.  As more Americans are vaccinated and the negative impact of the supply chain congestion wanes, the Federal Reserve is seeing more reasons to trim its asset purchases.

The Federal Reserve has made it clear that the decision to taper asset purchases and the decision to raise the federal funds rate are separate issues.  If, however, the taper policy was implemented to stimulate the economy by keeping interest rates low, traders should expect upward movement in interest rates as a result.  Increased interest rates may have an impact on the direction of foreign exchange rates regardless of a Federal Reserve decision to increase the fed funds rate.

Traders should contact their brokers for more information on how the Federal Reserve’s fed funds rate and tapering decisions may move foreign exchange rates.

Alton Drew

4.11.2021

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.

Interbank Market News Scan: Expecting GBP-USD to top 1.3780, but asking why would I want to buy the British pound?

The GBP-USD currency pair has, at the time of this writing, an exchange rate of 1.3812.  Analysis conducted by FXStreet has support for future increased price movement between 1.3640 and 1.3800 and resistance to price increase anywhere between 1.3840 and 1.3900.  Retail traders are more bearish on the currency pair’s price movement which, from what I gather from the analysis, may be contributing to GBP-USD breaching and staying above 1.3800.

Although, as a binary options trader, I focus on what exchange rate a pair will close out at by the end of the day meaning that what little profit I make is based on getting the price movement call correct, I share with most retail traders the desire to see a currency pair climb.  I will always cheer on the attainment of profit because profit equates to the income the trader needs in order to maintain a roof over her children’s heads.  But given the mostly gloomy news out of the United Kingdom, I have been asking myself, why would anyone want to buy the damned pound?

According to data from the Bank of England, inflation in the UK is running at 3.1% while the UK’s Office of National Statistics has gross domestic product growing at an annualized at 5.5%.  The UK government’s ten-year bond is yielding 1.18% and unemployment is at 4.5%.

Contrast UK performance with the United States and at first blush you wonder why exchange US currency for UK currency unless you just need a getaway to visit relatives in London.  The US is experiencing a rate of inflation more than twice the Federal Reserve’s 2% target (5.4% to be exact); is enjoying 6.7% growth in gross domestic product; and has ten-year government bonds yielding 1.65%. 

If anything, it would appear that a trader would borrow pound and make a few bets in the States.  This relative dollar strength may be what is keeping the 1.3800 lid on the GBP-USD.

In the meantime, I am thinking of conducting a comparison of UK consumer baskets to US consumer baskets.  I never hear anyone in the media make this type of comparison.  I think such a comparison would add to the discussion. Let me know what you think.  

Alton Drew

21.10.2021

Interbank Market News Scan: Dipping my toes into the USD-JPY market

For the past week or so I have been trading the binary options in the GBP-USD market.  I focused on this market primarily because the US and UK sessions intersect during the first few hours of the American session allowing me some time to do some reading and research before making a trade.  Time spent on another project, however, meant missing the opportunity to trade during those sessions, so I decided to dip my toes into the Asian session.

I admit to having had some hesitancy toward trading during the Asian session.  I am less familiar with Japanese monetary policy and the yen.  Their central bankers get a lot less play in the business media than central bankers at the Federal Reserve, European Central Bank, or the Bank of England which means reduced insights into Japanese monetary policy.  But I find that there is upside that can result from fear: the ever-present opportunity to learn.

The first stop in taking an opportunity to learn included a visit to the Bank of Japan’s website where I identified data on the BOJ’s overnight bank rates.  I then compared these rates with the overnight bank rates of the Federal Reserve.   Banks with accounts at the Federal Reserve are getting much better rates than those with accounts at the BOJ.

The business media has been reporting on Japan’s sub-zero rate policy for years, heck decades, so there was no surprise on my part when Bloomberg data showed the wide difference in rates between the U.S. and Japan.  The 150-point spread between U.S. 10-year government bonds and Japanese 10-year government bonds supported in my mind opportunities for those holding yen to move to the dollar thus increasing dollar demand and driving up the exchange rate between the two currencies.

Business media, in my opinion, paints the USD-JPY pair as volatile which I guess can cause some trepidation for traders trying to guess where the exchange rate is going to go.  I am growing increasingly suspect of most business media.  I see them more as purveyor of narrative instead of distributor of fact.  They are as noisy as their political media cousins and contribute to the noise and trepidation I mentioned earlier.

Fortunately, there are outlets such as Daily FX and FX Street that provide analysis that cuts through the noise. Using analysis from these outlets I was able to establish a probable floor of USD-JPY=112.00 and a probable ceiling of USD-JPY=113.50, betting that during a four-hour contract the exchange rate would exceed 113.20 prior to the contract’s expiration.

My biggest takeaway from last night’s trade was one should not allow fear and lack of knowledge to limit the opportunity to profit.  Seek out good information sources and pursue a path of knowledge.  Knowledge helps to process out the fear.

Alton Drew

12.10.2021  

Interbank Market News Scan: I expect that the GBP-USD will continue inching up

As of 10:03 am EST, I haven’t seen any news out of the Bank of England discussing modifications to findings in its August monetary policy report.  The current bank rate set by the Bank of England is 0.1% with a target rate of inflation at 2.0%.  The Bank of England currently purchases GBP895 million in government bonds in an attempt to keep borrowing rates low for consumers and businesses. 

The Bank of England expects inflation to continue rising over the Bank’s current 2.0% target for the next two years before falling back to the target.

OANDA reports a .41% increase in the GBP-USD exchange rate between 30 August and 7 September with an exchange rate of 1.3839 as of 10:03 am EST.  As of 10:17 am EST, Reuters reports an exchange rate of 1.3780 while Bloomberg reports an exchange rate of 1.3787.

There is a hearing scheduled at 11:00 am EST on 8 September 2021 to discuss the Bank of England’s August monetary policy report.  The London market closes today at 11:30 am EST.    

Alton Drew

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Interbank market news scan: Central banks, foreign exchange; cryptocurrency …

In the news …

According to preliminary statistics, outstanding aggregate financing to the real economy (AFRE) reached RMB289.74 trillion at end-January, increasing 13 percent year on year. Report on Aggregate Financing to the Real Economy (Stock) (January 2021) (pbc.gov.cn)

According to preliminary statistics, the aggregate financing to the real economy (AFRE) (flow) was RMB5.17 trillion in January 2021, up RMB120.7 billion year on year (y-o-y). Report on Aggregate Financing to the Real Economy (Flow) (January 2021) (pbc.gov.cn)

Consolidated financial statement of the Euro System. Consolidated financial statement of the Eurosystem (europa.eu)

The European Central Bank (ECB) announces today that it will begin publishing aggregate results of its Survey of Monetary Analysts (SMA) in June 2021. The survey, an ECB staff-level exercise, collects information on market participants’ expectations about the future evolution of key monetary policy parameters, financial market variables and the economy. The survey runs eight times a year and is aligned with the six-week schedule of the monetary policy meetings of the Governing Council. ECB to publish results of the Survey of Monetary Analysts (europa.eu)

The Bank and FCA held a consultation with FMIs and reviewed their co-operation regarding market infrastructure – seeking in particular feedback on how the authorities had co-operated during the Covid market events of Spring 2020. The authorities concluded that the MoU’s arrangements for co-operation remain effective, with appropriate co-ordination and no material duplication. Industry respondents acknowledged the efforts made on co-operation and the Bank and FCA remain committed to effective co-operation. Update on Bank of England and Financial Conduct Authority Memorandum of Understanding on the supervision of market infrastructure and payment systems | Bank of England

Reserve Bank of Australia releases official reserve assets picture. Official Reserve Assets – January 2021 | RBA

10 February 2021, 4:08 am EST