Whenever the Federal Reserve officials come out to raise their views on the market, the more muddled up the economists and investors get. The situation continues to be more confusing possibly up to September 21 when the FOMC meeting will kick off.
The split amongst the officials is noticeable
The Governor of the Federal Reserve, Daniel Tarullo, continued with his cautious interpretation of the economy while his counterpart President Eric Rosengren of Boston Fed went on to insist on the need for slow tightening. Just before the meeting expected to be held on September 20-21, there still seem to be divisions within the FOMC that appear to fade the picture of what will be decided.
“Everyone seems to be staying in their path,” indicated a CMC Markets staff. This further complicates the interpretation of the recent inconsistent data that includes the under-forecast jobs report of August.
Analysts continue to raise their views, and it is highly improbable that the Fed will raise the interest rate for the month.
Tarullo commented that he will wait until the economy gain momentum in order to raise the interest rates. He further declined to rule out the possibility that he and his team might move before December.
Views shed light on recent data
Governor Rosengren showed that the increase in salaries and wages displayed a unique similarity with the labour market starting to delineate its place in the wage data. He later commented that if failing to slowly get rid of accommodation will shorten the duration of the expected recovery.
Robert Kaplan, the Dallas Fed President, indicated that the past data had provided enough reasons for a possible interest rate increase. He later indicated that he would not have time to be cautious or patient, in that case.
As it always happen, once the Fed will move Tarullo and Rosengren will have the same stance. Despite his side, Tarullo seem to consider a possible rate increase.
The upcoming speech means a lot to investors
The discord in interpretation of the situations has led all interested parties to place a lot of importance on the speech to be delivered by Governor Lael Brainard in Chicago on Monday. This will be the last appearance of Fed before the FOMC meeting later in the week.
Numerous players in the market factored in a September rate hike after her speech was made public by Fed on Thursday.
Will the meeting bring unity?
Not only the market and investors are surprised by this wave of events, but also the Fed, who are not sure what their colleagues will support.
The Fed President John Williams of San Francisco said that it is in Washington that the views will be brought together and while considering the economy, a proper decision will then be made. The Governor said this on September 6 while in Reno, Nevada. For his part, he choose not to stand with any side and failed to comment on which side he will support come September 20-21 meeting. Further, he insisted that the decision they will fall for will entirely depend on what the economy displays as well as what will be discussed in the meeting.
Governor Tarullo further indicated that a huge discussion may be the order of the day depending on the data that is available; and what it means to the monetary policy.
Everyone seem to look for any possible signal from the Fed’s Federal Open Market Committee, but nothing seem uniform and nothing seem clear up to the end of the week. Given the current communications from Fed, it is nearly impossible to jump to any conclusion.
A specific decision to help make any conclusions ahead of the committee gathering in Washington DC will be too much to hope for from the Fed. The split and inconsistencies among the members only complicates the matter. In fact, more questions than they could be possibly answered by the Fed come up. Will the FOMC meeting be the market mover for next week? It is only time will tell.
Currency Trading Queries Answered
What is so different about the forex/currency market?
Forex is currently the largest trading market in the world, saying that it has only recently become a thing for the general ‘run-of-the-mill’ traders. Up to a few years ago when online trading became a hit and began to become a thing of the norm, the forex market was only used and was the domain of large financial institutions, worldwide corporations and various hedge funds. As times have changed, investors want to get a taste of the currency market. So, whether you are a forex beginner or you are looking for a good read about Forex, read on to find out the answers to some top currency trading questions.
Why is the Forex market different to others?
Stocks, futures, assets and options take place on what is called a regulated exchange. Currency trading does not. Regulated exchange is where the platforms are controlled by a governing body and where there is a panel to resolve disputes. With forex trading members trade on literally a handshake, something called credit agreements.
There is an amount of self-regulation within the forex market and members have to both compete and cooperate with one another, this provides a steady level of trading on certain platforms. In saying this, regular traders and dealers have to become a part of the National Futures Association which is where they bind to an agreement in the event of a dispute. Platforms like CMC Market are members of the NFA.
With Forex trading there is a number of ways that you can trade and bet. There is no rule with trading as there is with trading stocks. You can contemplate whether a currency pair will rise or even fall and bet your trade on such assumptions. Additionally there is no limit on the size of your investment. If you had one million, you could invest one million.
Is there commission fees in forex trading?
The forex market doesn’t have commissions because it doesn’t have brokers. Brokers are only used when trading stocks and shares. When a broker provides an advisable service or emits a trade for their client they are paid a commission. Forex simply have dealers who make their money through the bid-ask spread.
With forex trading apart from these initial fees, the profit made is for the investor alone to keep.
What exactly are you selling and buying in the currency market?
In actual fact with forex trading you are neither buying or selling. There is no physical exchange of currencies and you don’t own anything, hence the fact it is known as tax free trading. As the market is traded in currency pairs, it is simply the matter that the trader decides to go short on one currency and long on the other.
What are the different currencies?
There are some dealers who deal with diverse currencies like Czech koruna for example but there are a few main currencies to take note of when trading. The following pairs account for over 95% of all trades in the forex market. These are the currency major:
USD/JPY (dollar/Japanese yen)
GBP/USD (British pound/dollar)
USD/CHF (dollar/Swiss franc)
The following are the commodity pairs:
AUD/USD (Australian dollar/dollar)
USD/CAD (dollar/Canadian dollar)
NZD/USD (New Zealand dollar/dollar)
What are some of the terms used in Forex Trading?
Cable, sterling, pound – different names for the GBP
Greenback, buck – names used for the U.S. dollar
Swissie – another name used for the Swiss franc
Aussie – another name used for the Australian dollar
Kiwi – another name used for the New Zealand dollar
Loonie, the little dollar – various names used for the Canadian dollar
Figure – A forex term meaning a round number like 1.2000
Yard – a billion units, for example “I sold a couple of yards of sterling.”
Is Forex Trading for me?
If you are thinking about taking up Forex trading then have a look at platforms that offer a demo trading account so you can get the hang of things before you invest in any money. There is plenty of courses and training material to look into as well if you think you might be interested in Forex Trading.