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Currency

A Look at the Yield Curve and Why the Fed Is Raising Rates

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Posted by Matthew Kerkhoff via Dow Theory Letters

on Friday, 17 March 2017 07:18

All attention is once again on Janet Yellen and the Federal Reserve this week, as the FOMC meets to determine whether an interest rate hike is warranted.

At this point, with Fed Funds futures prices pointing toward a 95% chance of a rate hike, an increase to the federal funds rate is a near certainty. But the implications and consequences of a rate hike are less so. Let’s dig into that further.

One thing I’ve noticed in speaking to investors is that there is often an inclination to group all interest rates together. When they hear about the Fed “raising rates,” many assume that interest rates across the board, for nearly everything, will rise. This couldn’t be further from the truth and warrants more explanation.

Interest rates come in all shapes, sizes and most importantly, maturities. That is, the length of the term over which money is borrowed, and therefore accrues interest.

Take US Treasuries as an example. If you want to loan the US government money, they’ll pay you a different interest rate based on the term of the loan. You can see today’s pricing for a few select maturities in the table below:

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If we take these maturities and their respective interest rates and plot them on a chart, we end up with what’s known as the yield curve. You can see this as the red line in the chart below.



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Currency

Low Oil Prices Continue To Decimate Saudi Arabia’s Currency Reserves

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Posted by Steve St. Angelo - SRSrocco Report

on Wednesday, 15 March 2017 06:49

The low oil price continues to wreak financial havoc on the largest oil producer in the Middle East.  While the Mainstream press has published articles forecasting a rebound in Saudi Arabia’s financial outlook, due to higher oil prices this year, it seems like the Kingdom’s problems are just beginning.

In order to make up for falling oil revenues, Saudi Arabia has been liquidating its foreign currency reserves at a pretty good rate over the past two and a half years.  I discussed this in my article, Bankrupting OPEC… One Million Barrels Of Oil At A Time.  In that article I published this chart:

Saudi-Arabia-Foreign-Reserves-vs-Oil-Price-2012-2016-768x374

Due to the rapid oil price decline, Saudi Arabia liquidated 27% of its foreign currency reserves.  At its peak, Saudi Arabia held $797 billion in foreign currency reserves.  In just two and a half years, Saudi Arabia’s currency reserves declined $258 billion (U.S. Dollars) to $536 billion currently (Dec 2016).

I also published the following chart showing Saudi Arabia’s foreign currency reserves declined in 2016, even as the oil price recovered from a low of $30.7 in January to a high of $53.3 in December:



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Currency

Forex Trading Alert: USD/CAD at Fresh Highs

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Posted by Nadia Simmons & Przemyslaw Radomski - Sunshine Profitsadia Simmons - Sunshine Profitsski - Sunshine Profitsadia Simmons - Sunshine Profits

on Thursday, 09 March 2017 08:42

Forex Trading Alert originally published on March 8, 2016, 9:32 AM


Earlier today, the U.S. dollar extended gains against its Canadian counterpart as declining crude oil prices pushed the Canadian currency lower. As a result, USD/CAD reached the next resistance zone. Will it stop currency bulls in the coming days?

In our opinion, the following forex trading positions are justified – summary:

EUR/USD: short (a stop-loss order at 1.0735; the initial downside target at 1.0388)
GBP/USD: none, in other words, taking profits off the table is justified from the risk/reward perspective.
USD/JPY: long (a stop-loss order at 111; the initial upside target at 115.43)
USD/CAD: none, in other words, taking profits off the table is justified from the risk/reward perspective.
USD/CHF: long (a stop-loss order at 0.9891; the initial upside target at 1.0180)
AUD/USD: none

EUR/USD

43875 a large
Larger Image



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Currency

Wasn’t The Dollar Supposed To Go “UP” On A Rate Hike?

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Posted by Avi Gilburt - Elliottwavetrader.net

on Monday, 06 March 2017 08:50

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The dollar has been one of the biggest contrarian trades I have seen in years.  Every time the market is so certain about the direction it will run, it does the exact opposite and often in extreme fashion.  In my last weekend update, I noted how we called the multi-year rally off the 2011 lows when the market was expecting the dollar to crash due to all the QE.  And, I also noted how the dollar has been moving down after the Fed has raised rates, despite the common expectations that the dollar should rise.

Some days, if you listen really closely, you can almost hear the dollar laughing as it moves “unexpectedly.”



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Currency

Europe’s Leaders Prepare for Crisis

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Posted by Stratfor

on Thursday, 02 March 2017 09:11

strasbourg-sm-1This year will prove decisive for the eurozone. Between March and September, the Netherlands, France, and Germany will hold general elections whose outcomes will help determine the future of Europe's common currency. Italy, too, may hold a vote by the end of the year. In light of the uncertainty that awaits, the eurozone's major players are making moves to brace themselves for whatever the future brings.

...continue reading this fascinating Strafor analysis HERE

 

...related from Michael Campbell:

Major Warning: What's Next Will Be Explosive



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