ForEx Forecast for the Week – Dollar in a Recovery Stage

This week, as being forecasted, dollar is seen to be on its way to recovery while Euro, Pound and Yen are stumbling. The risk trends are seen improving as well as Dollar gaining too. In the midst of NFPs, the G20 go over again the risks while expecting volatility along the way.

US Dollar’s Best

Since November’s significant break to 12-year highs, this week US Dollar has rallied in the market as the currency’s best performance. This is a move proving a hasty exhaustion.

Euro’s Sinking

On Euro forecast, the currency is seen to be sinking this week while investors are waiting for the action of ECB. Well, there’s no other way to describe the scene – but, Euro is experiencing déjà vu. If what has been said is true, then the classic situation “buy the rumor, sell the news” could happen.

GB Pound to Dominate Headlines

Nearly end of the week, the news had Mr. David Cameron had struck a deal with European leadership allowing British leadership rally for an ‘in’ vote in the Brexit referendum. Well, we can see another picture of Pound this week and it would really be different.

Japanese Yen Awaiting

On the other hand, the Japanese Yen is said to be waiting for the status quo to be changing for it to gain well. Yen is said to be rallying in the market for fourth consecutive week now against Euro and British Pound. However, with the great state of US Dollar and US economic data and the stumbling of Japanese Yen, the USD and JPY exchange rate has made its exchange rate losing streak brought to an end.

Canadian and Australian Dollar

A number of market participants are on the watch for the oil market against the Canadian Dollar movements. This is after the Bank of Canada is observed eyeing a top spot in the G10.

On the other hand, Australian Dollar faces shocking storm of domestic and external pressure. The AUS Dollar may fall into significantly selling pressure as prices are facing a great storm of risk between local and international market.

Chinese Yuan Gets Slightly Weak

Both the local and external Yuan rates are moving slightly this week. Both are getting lower against the US Dollar last Friday.

Gold to Go

The gold forecast is seen as gold consolidation is breaking to clear the way ahead of NFPs. The prices of gold for the second time in a row slid with the precious metal backing a bit of 0.2% to trade at New York last Friday.

Bloomberg Tradebook Introduces a New Feature for their STAZ Tool

Bloomberg Tradebook has introduced a product improvement to their Strategy Analyzer (STAZ) tool for traders. They’ve added a new feature called “In-Trade” that will provide in-trade functions, in addition to the pre-trade and post-trade features of their trading platforms.

What are the Features of In-Trade Functionality Tool?

Aiming towards investors and traders, STAZ uses several components together, which includes the data and analytics tools of Bloomberg that have predictive models from Tradebook itself, and enables traders to optimize their trading methods in real-time while improving their execution.

The In-Trade functionality tool provides traders an opportunity to see how real-time STAZ algorithms work against the market’s backdrop versus the previous version that only provides pre-trading market analysis and post-trading cost analysis, among some other features.

In addition, the features enable the traders to measure execution metrics using various measurement points, such as bid, mid, open auction, ask, closing auction prices, and block trading and dark venues.

Per description during the press release, the trader may have market data, predictive models, and performance metrics with in-trade features. Combining all of these data is critical for algorithm-focused trading platforms wherein information should be available at the forefront of the interface and not hidden within reports and statements (that can be a distraction for traders). This task makes it even more challenging for a platform that manages a variety of products and information.

Tradebook
Tradebook’s STAZ Strategy Analyzer. Source: Bloomberg

Trading with STAZ

STAZ manages approximately 3 billion ticks per day in about 450,000 equity symbols for it to find opportunities for trading on live market data. Their product is available under the STAZ<Go> terminal, and Bloomberg provides spot FX through their Tradebook Services LLC unit, according to their updates.

During their press release, Kapil, Phadnis, the Head of Algorithmic Trading Quantitative Research of Bloomberg Tradebook, said, “Market data without actionable insights is really just noise. STAZ In-Trade is helping traders extract these insights to make more informed decisions about their strategies.”

He added: “We’re providing transparency into how algorithms operate, giving traders access to information they need to adjust their trading strategies in real-time based on market conditions.”

Although many institutional traders have personal proprietary platforms or technology operations for algorithms, some have it outsourced, including those that are co-located. In many cases, however, it can be a mix of the two as setups can be focused usually in a certain area like strategies that are instrument/industry specific or product/segment, for example.

OECD to G20: Find Solutions to Economic Slowdown

As the top finance ministers and central bankers meet in Shanghai, the Organization for Economic Cooperation and Development (OECD) has put pressure on the G-20 to create an urgent policy in response to stuttering global growth, in addition to the call from the International Monetary Fund (IMF).

Emphasizing the instability of the world economy and markets, Angel Gurria (the OECD secretary general) said in Shanghai that the growth was still muted 8 years from the global financial crisis.

”The problem is structural reforms are decelerating just at the time when they should be accelerating,” he said. “We are in the eighth year (after the global financial) crisis and we have not reached the 4 percent cruising speed that we had before the crisis… the speed, the appetite, the courage for reforms has waned; we should pick it up and do exactly the opposite.”

According to Gurria, central bankers have done the best that they can and it should now be on the governments hands to stimulate the private sector to invest again.

The comments of Gurria came as the G-20 representatives (the group of leading developed and emerging economies around the world) meet in the capital of China on Friday to evaluate the world economy and two days after the IMF has called for “multilateral actions to boost growth and contain risk,” especially through fiscal stimulation.

The IMF noted that the G-20 had promised in 2014 to improve global growth by an additional 2% by 2018. Based on the measurements they have implemented so far, they had only added 0.8%.

The OECD Report

The OECD, on the other hand, monitors reforms that were being implemented by the G-20 to help them keep track of the promise they made 2 years ago. On Friday, the organization released a report regarding the reforms on economic policy.

The report said: “Even though progress is made in tackling some of the main challenges, the slowdown in the pace of reforms observed in 2013-14 has continued in 2015, even after taking into account measures that are in the pipeline but that have yet to be fully implemented.”

The pace of the reform policies was generally faster in countries in Southern Europe, including Italy and Spain, than European countries in the Northern part, according the OECD. Meanwhile, outside Europe, the reform leaders are China, India, Japan, and Mexico.

Growth Stimulation

Having implemented negative interest rates on their central banks last month to which commentators said has little effect, the Finance Minister of Japan Taro Aso pledged for a group response to calm the current crisis faced by the global market today. This is to address the growing fear that the economic slowdown in China may spread worldwide.

However, US Treasury Secretary Jack Lew played down the chances of this group “crisis response”, telling Bloomberg TV on Wednesday that it isn’t expected because the current economic environment isn’t considered as a crisis situation.

There has been a decrease in productivity in most countries, with slowdown going for about 15 years (in advanced economies at least).

FMA Warns of NoaFX

The Financial Markets Authority (FMA) of New Zealand has issued a warning on Tuesday that the Capital Market Investments Limited is not operating under strict licensing.

According to the NoaFX website, they are a premier trading company that offers “superior” trading services, customer support, as well as training to their international clients, retail, and organizational clients.

The regulator emphasized that the website of the forex broker NoaFX claims that it is registered in New Zealand as a provider for financial services and a member of a financial dispute resolution scheme. “In fact it is neither,” says FMA. “The company is not operating under the strict licensing and regulation requirements of New Zealand, as claimed.”

The FMA regulates capital markets and financial services in New Zealand. They seek to promote and facilitate the establishment of fair, efficient, and transparent financial markets. They have the responsibility of making sure that the public is confident in the financial markets and support the growth of the capital base in New Zealand.

Checking the Registry

A check was performed in the Financial Services Providers Register in New Zealand which showed that Capital Markets Investments from 2013, but it has already been discontinued in January 2016.

NoaFX, the forex broker of the company, is actually offering trades in forex and CFDs with a leverage of up to 1:500 per request. It is important to note that the normal leverage is only 1:100. Trading is done through the MetaTrader4 platform and the NoaFX web platform.

Capital Markets Investment Website

On the website of the Capital Markets Investment, it says that it offers forex brokerage solutions, private equity and investment funds, immigration advice, debit card solutions, real estate and hotel management, and other financial services. The company claims that it has businesses in 32 countries that have strong footholds in New Zealand and South East Asian Markets, envisioning themselves as the gateway for global investors in these various regions.

Foreign Exchange: Yen Stronger?

There has been significant gains on the yen on Friday as hit its first 2 ½ year high on the euro. It is said to be caused by the increased demand of the Japanese currency as equities and crude oil swayed yet again.

The euro dropped to 125.47 yen, which is its lowest since June of 2013. The dollar, on the other hand, fell 0.4% at 112.83 yen, slowly going back to its 15-month low on record at approximately 111.00 last week. While the green currency almost went up to 115 on Tuesday, it was poised to lose by 0.4% later in the week.

According to several expert traders, a drop in oil prices had caused the concerns in equity markets that prompted a flight back to safety. Japan’s Nikkei was previously down over 2 percent.

As the euro changed at $ 1.1119 after being on a 2-week low of $1.1071, it has lost 1.2% on the week.

Masashi Murata, a senior currency strategist at Brown Brothers Harriman in Tokyo, said, “I think the euro has further downside. The currency faces political risk as economic woes and the refugee crisis clouds the EU’s future.”

Although the European Central Bank may implement further monetary easing to protect the euro, the result of this loosening may likely be short lived, says Murata. The minutes from the European Central Bank’s meeting last January showed that some policymakers have been advocating for actions that has to be taken as new threats arise.

On the contrary, the San Francisco Fed President John William said that the US central bank must stick to its plan in gradually raising interest rates. He also added that his outlook changed only a little since last December.

The diverging policy pathways among major central banks were thought to be the cause for the heightened market volatility.

The Australian dollar fell as John Edwards, a board member of the Reserve Bank of Australia, has told the Wall Street Journal that it was too high. Aside from that, there are also a number of risks arising as other central banks have also implemented negative interest rates.

The Australian dollar was down by 0.8% at $0.7098. It dropped to a 7-year low of $0.6827 in mid-January when there was sharp deterioration of the global risk sentiment. However, it crept higher ever since.

Meanwhile, the pound was up 0.1% at $1.4335 as it pulls further away from Wednesday’s trough of $1.4235.

Israel on its Lowest Economic Growth Since 2009

Last Tuesday the Central Bureau of Statistics said in a report that the economy expanded at an annualized pace of 2.2% during the last six months of year 2015.

Accordingly, it is the lowest six-month growth since the financial crisis took place on 2009. Israel’s economy went down by 1.6%.

After the global financial crisis, the economic growth of Israel had seemingly expanding at rapid pace. For instance, during the first half of 2011, the economic expansion was at 5% pace following the 5.7% expansion on the second half of 2010 and 5.6% on the first half of the same year.

On that note, Israel’s economy was said to have an annual potential growth of 5% in average.

During the 2015’s last quarter, the Israel’s economy expansion moved to 3.3% pace against the 2.5% in the third quarter of the same year, and on the second quarter 0.8% and 2.8% on its first quarter.

What is annualized pace growth rate mean? It means “the rate at which an economy would grow had it maintained that pace for an entire year.”

Idan Azoulay, CEO of Epsilon Mutual Funds said that the growth was greatly affected by the increase of public consumption that pulled an increase of government expenditure enabled by the excess of revenues last year. Also he noted that the private consumption began increasing following the steady mode for the past year making economists cautiously optimistic.

For the year 2015, the bureau of statistics reported an indication of 5.2% pace of public consumption growth and a 3% pace on the private consumption. On the aspect of exports of goods and services the expansion was indicated at 2.2% and 0.9% pace in the fixed assets and in the imports of goods and services, the expansion pace was at 5.2%

Additionally, the agricultural products exports as well as diamond exports dropped by at a significant figure which greatly affect the country’s economic growth.

At the moment, Finance Ministry and the Prime Minister’s Office have not yet said a word regarding the slow growth of Israel’s economy.

HSBC’s Board Voted to Remain Its Headquarters in UK

HSBC, one of the largest banks in Europe informed financial market on Monday that the institution would still remain in Britain, contrary to the idea of moving to Hong Kong because of United Kingdom’s increased regulation. – London (AFP)

In a note to the London Stock Exchange on Sunday, The Hong Kong and Shanghai banking Corporation said the board seen that London really has more advantages and ideals for being a home base for the institution.

“Considering a main office in UK and major business in Asia Pacific, we’re able to give our clients or stakeholders the best of both worlds,” says group chairman Douglas Flint to BBC radio.

The bank review on where to put their head office began in April last year, prior to British general election in the midst of rising crackdown calls on sectors found by some voters as incompetent.

According to British finance ministry, the decision was “a vote of confidence in the government’s economic plan and a boost to our goal of making the UK a great place to do more business with China and the rest of Asia”.

HSBC
HSBC to stay in UK. Photo from www.sigmalive.com

‘Big vote of confidence’

Although the review apparently considered Germany and United States, the final option had been between Britain and Hong Kong.

Since bank stocks have been through a lot of struggle and still coping with ambiguity from a referendum on Britain’s EU membership this year, the decision can be very helpful for the City.

In the bank statement, it says; “London is one of the world’s leading international financial centers and home to a large pool of highly skilled, international talent.” Therefore, it is really apt for being the home base for global financial institution like HSBC.

The decision is a big vote of confidence in UK, said British banking Association spokesman.

With HSBC share price rose 1.27 percent at the start of trading to 446 pence as well as the rising of the bank’s Hong Kong-listed stocks by more than four percent at closing, investors cheered the news.

But Confederation of British Industry’s director-general Carolyn Fairbairn said, “We cannot afford to be at ease about the contribution banking makes to the British economy, a sector that employs over half a million people”. She also said that banks were indeed critical for the British company.

Winning concession

Frances Lun of Geo Securities said the headquarters review had been designed to put pressure on the UK government over regulations. He told AFP that multinationals really do this for a century, to win concessions from the government since they are key players and contributors to GDP.

Since 1992, HSBC was already situated in Britain after it took over Midland Bank and moved its head office from Hong Kong to London.

MUFG Hires More Staffs from Competitors

The largest lender by assets in Japan, Mitsubishi UFJ Financial Group (MUFG) Incorporated, is currently adding staffs in Asia in an effort to be among the top ranks of banks in the trade finance industry. MUFG and other Japanese lenders are expanding in Southeast Asia to counter zero interest rates in Japan.

According to Ken Stratton, the head of Asia and Oceana transaction banking sales in a telephone interview last month, MUFG has recently hired 4 trade finance bankers from their competitors which include Australia & New Zealand Banking Group Ltd. and HSBC Holdings Plc. as they seek to be among the world’s top 5 lenders for international commerce by 2020.

Major trade finance banks have cut down their loan books as prices of commodities drop and decrease shipments to and from China trimmed the dollar value of loans. Identifying the market is a core area; MUFG saw the setback as an opportunity which prompted them to set a goal last year for a 70% increase in business by the fiscal year ending March 2018.

“Over the last three years or so, we have seen quite a number of the large global banks pull back on lending as they come upon challenges in their home markets, especially in the U.S.,” said Stratton.

“BTMU has really stepped up to the plate and provided some great funding to these global corporates,” he added, referring to the Bank of Tokyo-Mitsubishi UFJ unit.

MUFG set up transaction banking business in Asia and Oceana in May 2012, where they have over 150 employees in 122 countries, including 70 staffs in Singapore. The unit also offers cash management.

Top Lenders

The lender is ranked 9th in market shares for arranging trade finance for many major Asian companies, according to a report in September last year. HSBC has topped the ranking in trade finance, followed by the London-based Standard Chartered Plc and New York-based Citigroup Inc.

The profitability of trade finance in the region, however, has been intensified after banks in Japan and elsewhere started to expand in the business and as transaction values dropped. Commodity prices, on the other hand, according to Bloomberg Commodity Index, have been low 6 years in a row as oil and copper dropped.

Low Returns

Mike Smith, the ex CEO of ANZ, said, returns from trade finance ending September 30 were a little too low. Even with ample liquidity, MUFG has also faced ample liquidity, according to Stratton.

“Although we are currently slightly behind our internal targets for Asia and Oceania, we are on track to achieve our March year-end targets for transaction banking,” Stratton said.

Gold, The Ultimate Safe Haven Asset?

The sharp rally of Gold from December’s $1,046 low has shown a price hike of over 17% in a span of just a few weeks. In February 11, this precious metal traded at about $1,230. The sudden awakening of Gold from its slumber caught a number of people by surprise. Similarly, the stock market plunge lasted a lot longer than usual when it first started to drop. Clearly, the status of the precious metal gold as an ultimate safe haven asset has truly been maintained and confirmed, yet again. It also has benefited from the weaker dollar as the hopes for further interest rate rises this year have been dashed.

Janet Yellen, the chairwoman of the Federal Reserve, confirmed that there will be no more rate rises during her testimony on February 10th. Accordingly, the opportunity cost of holding the yellow metal, which has no interest, has dropped relatively. Thus, some investors are running back to gold as evidenced by increased inflows of gold-backed ETFs. The only thing that would stop gold would be a strong rebound of the value of dollar, which is very unlikely to happen in the near future. With that being said, some data will be released on Friday that may provide some support to the dollar. Meanwhile, stocks may rebound on a potential intervention from the central bank or when the oil bounces back.

On the other hand, the demand for gold in the last quarter of 2015 has jumped 4% year-over-year according to the World Gold Council. There is a 15 percent rise of investment demand while major central banks have increased their purchases by 25%. Because of a weaker demand in the first half of 2015, the total annual demand of gold last year was lower than 2014. The lower prices of gold, however, resulted to a rise in its demand on the second half.

Investing in Financial Markets Might be Best for You

Are existing trends of the Forex market going to change this year? This has been constantly on the minds of those who are in the international Forex community — financiers, investors, traders, and other financial experts.

What’s in store for the coming months?

According to some experts at Nordhill Capital, 2015’s Forex was about strengthening the US dollar and de-valuing its counterparts (for both major and emerging markets). In terms of commodities, it was a bear run for crude oil, as well as other energy companies and commodities. Russia was among those who experienced major challenges in the economy.

Apparently, the consequences of last year’s happenings are going to be felt this year. However, there aren’t any factors that could make us predict radical changes in financial markets — particularly Forex — just yet. This is according to what the founder of Nordhill Capital, Maxim Sepp, thinks.

Experts say that the US Dollar may have to take a timeout after its bull run last year. But still, the retracement won’t be able to translate further to a bear market as the dominating tendency. Experts are expecting that the American currency will stay strong for approximately 2 to 3 more years. While the Fed has put an end to their monetary easing programs, focusing more on raising interest rates, the central banks of EU and Japan are busy ding the opposite as they are currently implementing easing programs. This means that their currencies won’t get to strengthen a lot versus the US Dollar. Moreover, a strong dollar implies weak commodities. Even if there may be some recovery in the oil industry this year, the overall bias would still be bearish.

Why should you invest in Financial Markets?

A greater number of independent experts assume that under these market situations, it would be a lot better to invest more in Forex and other financial markets through investment companies that are run by trading experts with years of experience. In addition, they are also able to offer innovate and efficient investment options. With that being said, Nordhill Capital is the best investment solutions company today. It is not by accident that the Master Forex-V Expo awarded Nordhill Capital the World’s Best Investment Fund 2015.

One of the many examples of efficient investing with Nordhill Capital is their strategy called HybridFX. It is based on Bollinger Bands-based short-term and mid-term strategies for 17 assets that are mixed with certain strategies that work in times of low market volatility.