For the latest FX Daily Trading Update see FX Day Trading.
FX Day Trading - 4 August 2011
SNB and BoJ act to depress their currencies
BoE and ECB rate decisions today
No change expected
Until recently, drivers in Nigeria who went the wrong way down a one-way street were hit with a £100 fine (or a £10 grease to the traffic cop).
Now, according to this morning's Independent, they will be subject to a psychiatric examination. The authorities have decreed that anyone who goes against the flow needs their head examining.
It is tempting to say the same about central banks who pit themselves against the currency flow.
A thousand years ago King Cnut set his throne on the beach and commanded the incoming tide to halt. It did not. It continued to flow, wetting his royal feet and legs. The stunt was designed to demonstrate that Cnut was powerless against the Almighty.
The Cnuts in today's central banks are doing no such thing. They really expect the tide to go out. It is well-established that to keep doing the same thing in the expectation of a different outcome is a sign of insanity.
On 26 February 1978 The Sarasota Herald-Tribune reported that "Effective April 1 a negative interest charge of 40% annually will be extended to all Swiss franc deposits held by alien non-residents..." At the time USD/CHF was roughly 1.92, EUR/CHF was 2.32 (in reality DEM/CHF was 1.19) and GBP/CHF was 3.63. The purpose of the move was to prevent the further rise of the franc's value.
On 16 March 2009, when the Swiss franc was trading at 1.40 to the US dollar, 1.48 to the euro and 1.59 to the pound, the Swiss National Bank cut its interest rate target to 0.25%. The purpose of the move was to prevent the further rise of the franc's value.
Yesterday, with USD/CHF at 0.76, EUR/CHF at 1.08 and GBP/CHF at 1.24 the Swiss National Bank cut its target rate to "as close to zero as possible". The purpose of the move was to prevent the further rise of the franc's value.
Presumably the SNB expects yesterday's rate cut to be effective because "this time," as politicians are so keen on telling us, "things are different." Time will tell, but Swiss hoteliers should not expect a sudden rush of bookings.
The Bank of Japan was this morning's Cnut. Unable usefully to lower the benchmark yen interest rate any further than its current 0-0.1% target the BoJ intervened to sell the currency, taking it one yen lower against the dollar and down by two against the pound.
It has since fallen further, probably because FX spread betting investors were primed for the BoJ intervention. They could well allow the yen to extend its retreat before stepping back in to pick up cheaper yen.
The SNB action on Wednesday came just as the London market got going, giving investors something to think about ahead of the services sector purchasing managers' index announcements.
Britain's PMI gave them more. It was up (up!) by a point and a half at 55.4 and would turn out to be the strongest of the lot with the exception of China's 59.6. Euroland was lowest at 51.6. As suspected, the US went down to 52.7 instead of up and Germany managed 52.9.
Apart from the PMIs the only other figures yesterday were a 0.9% monthly increase for euro zone retail sales, a 0.8% fall in US factory orders and a 114k increase in US employment from ADP.
Although the ADP has improved its correlation with US non-farm payrolls recently, last month it was well adrift so investors took the 114k figure with a pinch of salt.
New Zealand unemployment was steady at 6.5%
Today's ecostats start with German factory orders and end with US weekly jobless claims. There are none in between.
Monetary policy decisions from the Bank of England and the European Central Bank are not expected to deliver any surprises, at least as far as the bald statements are concerned.
Online spread betting investors will be interested to hear about the latest vigilance status at the ECB as guidance to what happens next to euro interest rates.
They will have to wait for a fortnight to read in the minutes of the MPC meeting whether M/s Weale and Deale continued to vote for a UK rate increase or if they decided to go with the no-change majority because of weak growth.
There is nothing on today's agenda guaranteed to affect the pound. Even so, be prepared for it to suffer a setback after the MPC announcement on speculation that there are no longer any hawks left on the committee.
Currency Trading and Spread Betting carry a high level of risk to your capital and you can lose more than your initial investment, they may not be suitable for all investors. Ensure you only speculate with money that you can afford to lose and that you fully understand the risks involved and seek independent financial advice where necessary.
The above content does not constitute investment advice, it is provided purely for information purposes and is delivered as a personal view of the writer. Neither the contributing company (or writer) nor Online-Spread-Betting.com accepts any responsibility for any use that may be made of the content.
'Swiss National Bank Cuts Interest Rates as USD/CHF Spreads Hit 0.76', Article by Moneycorp, last update: 4-Aug-11
Related articles:
FX Day Trading, 18-Apr-12,
Daily FX Trading updates covering the influences on the key FX markets. Daily updates include key FX market movements and features the Dollar, Pound, Euro and Yen as well as...see: FX Day Trading
FX Day Trader, 17-Apr-12,
A daily review of the currency markets concentrating on the major Dollar, Yen, Euro and Pound Sterling markets...see: FX Day Trader
£1 per point: Start trading £1 per point/tick & an initial deposit of £30
Multiple markets: Forex , Commodities, Indices & Equities
Risk Warning - Spread betting carries a high level of risk to your capital & you may lose more than your initial investment. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved, seek financial advice where necessary & make sure spread betting meets your investment objectives.
(1) The FTSE Rolling Daily Spread is 1 tick during market hours & 4 ticks out of hours. 1 Tick is defined as a full FTSE point. See our Product Information for more details. (2) The above information is correct at time of writing. (3) Tax Law can change.
FinancialSpreads.com is a trading name of London Capital Group Ltd which is authorised & regulated by the Financial Services Authority (FSA). Registered address: is 4th Floor, 12 Appold Street, London EC2A 2AW. All information correct at time of publication.
Risk Warning:
Spread Betting carries a high level of risk
to your capital and you can lose more than your initial investment,
it may not be suitable for all investors. Ensure you only
speculate with money that you can afford to lose and that you fully
understand the risks involved and seek independent financial advice where necessary.
Disclaimer:
Online-Spread-Betting.com does not endorse the information and
analysis available on this site. It is provided purely for information
purposes and is delivered as a personal view of the writer. Under no circumstances
is the information hereon to be used or considered as, an offer to sell, or a
solicitation of any offer to buy. The website content does not constitute investment
advice and neither the individual contributor nor Online-Spread-Betting.com accepts any
responsibility for any use that may be made of the content.
* Tax Free Trading:
Tax law is subject to change. It may also differ if you pay tax in a jurisdiction outside the UK.
