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Market Trading News and Research from 26 April 2024
| Raw materials | Closed | Change, % |
|---|---|---|
| Silver | 27.404 | 0.88 |
| Gold | 2331.4 | 0.59 |
| Palladium | 986.13 | -1.19 |
- AUD/JPY extends its winning streak after the lower-than-expected Tokyo CPI data released on Friday.
- The Australian 10-year Government Bond Yield has reached a 21-week high of 4.59%.
- Tokyo CPI has fallen below the Bank of Japan's (BoJ) 2% target for the second time this year.
AUD/JPY extends its winning streak for the fifth consecutive session on Friday. The Australian Dollar (AUD) finds support from increasing bids for a hawkish stance for the Reserve Bank of Australia’s (RBA) monetary policy. The revision by TD Securities indicates a delay in the expected rate cut by the Reserve Bank of Australia (RBA) until February 2025 instead of November. This boosts the Australian Dollar (AUD) and consequently supports the AUD/JPY cross.
Australia’s Consumer Price Index (CPI) data on Wednesday, surpassing expectations, is also playing a role in an increase in Australian government bond yields as traders price out expectations regarding interest rate cuts by the RBA in 2024. The Australian 10-year Government Bond Yield has reached a 21-week high of 4.59%, indicating a significant upward trend.
The Japanese Yen (JPY) depreciated following the release of Japan's Tokyo Consumer Price Index (CPI), which came in well below expectations early Friday. This print marks the second time this year that inflation has fallen below the Bank of Japan's (BoJ) 2% target, reducing pressure on the central bank to raise interest rates again. As a result, market sentiment is shifting towards the expectation that the BoJ will abstain from implementing rate hikes during its meeting on Friday.
Daily Digest Market Movers: AUD/JPY gains ground after weaker Tokyo’s CPI data
- Tokyo Consumer Price Index rose 1.8% YoY in April, well below the previous print of 2.6%. Markets were broadly expecting Tokyo inflation to hold steady over the period. The Core CPI fell sharply to 1.6% year-on-year, marking its lowest level since March 2022 and falling well below forecasts of 2.2%.
- SocGen's assessment of the potential for USD/JPY to test the Japanese Ministry of Finance's intervention limits due to persistent US rate expectations and recent market dynamics suggests a significant focus on the interplay between US economic data and currency movements.
- On Friday, a report from Reuters said that the Bank of Japan (BOJ) is expected to project that inflation will remain close to its 2% target in the coming years and signal its preparedness to raise interest rates from their near-zero levels. This stance by the BOJ is aimed at preventing yen depreciation and discouraging market participants from pushing the currency to fresh 34-year lows.
- Jiji news agency reported on Thursday that the Bank of Japan (BOJ) might reduce its bond purchases appears to be exerting a more significant influence on the market sentiment compared to the lower-than-expected Tokyo Consumer Price Index (CPI) data released today.
- According to Luci Ellis, Westpac's chief economist and former Assistant Governor (Economic) at the Reserve Bank of Australia, inflation slightly surpassed expectations in the March quarter. They anticipate the Board will maintain interest rates in May and have revised the projected date for the initial rate reduction from September to November this year.
- According to analysts at Barrenjoey Capital Partners, a leading Australian investment banking firm, advised to utilize the trimmed mean to rank Australia's inflation. Australia's six-month annualized rate of trimmed mean inflation, standing at 3.6%, is notably the highest worldwide, surpassing even the United States' 3.2% six-month annualized rate of trimmed mean inflation.
- Australia’s Consumer Price Index (CPI) rose by 1.0% QoQ in the first quarter of 2024, against the expected 0.8% and 0.6% prior. CPI (YoY) increased by 3.6% compared to the forecast of 3.4% for Q1 and 4.1% prior. Australia’s Monthly Consumer Price Index (YoY) rose by 3.5% in March, against the market expectations and the previous reading of 3.4%.
- According to the Japan Times, the proportion of Japanese companies intending to increase their pay scales reached 70.7%, marking a rise of 6.3 percentage points from the previous year. Additionally, the number of companies planning to implement pay-scale hikes and regular pay increases totaling 5% or more amounted to 36.5%, nearly doubling from the previous year. This could provide support for the Yen.
Technical Analysis: AUD/JPY hovers around the major level of 101.50
The AUD/JPY trades around 101.50 on Friday, testing the upper boundary of the daily ascending channel, trading around a fresh five-month high of 101.66. Additionally, the 14-day Relative Strength Index (RSI) is trending above the 50-level, strengthening the bullish sentiment. The immediate resistance is seen at the psychological level of 102.00.
On the downside, immediate support for the AUD/JPY pair could be found at the psychological level of 101.00. If the pair breaches below this level, it suggests a bearish sentiment may prevail and might lead the AUD/JPY cross to a further decline toward the psychological level of 100.00, followed by the 21-day Exponential Moving Average (EMA) at the level of 99.87. Further depreciation will likely test the lower boundary of the ascending channel around the level of 99.00.
AUD/JPY: Daily Chart
Australian Dollar price today
The table below shows the percentage change of the Australian Dollar (AUD) against listed major currencies today. The Australian Dollar was the strongest against the Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.00% | 0.02% | -0.04% | -0.10% | 0.01% | -0.13% | 0.05% | |
| EUR | 0.00% | 0.01% | -0.02% | -0.10% | 0.00% | -0.13% | 0.05% | |
| GBP | -0.01% | -0.02% | -0.04% | -0.12% | 0.00% | -0.17% | 0.04% | |
| CAD | 0.03% | 0.03% | 0.03% | -0.08% | 0.03% | -0.13% | 0.06% | |
| AUD | 0.10% | 0.10% | 0.12% | 0.08% | 0.11% | -0.05% | 0.16% | |
| JPY | -0.01% | -0.01% | -0.01% | -0.04% | -0.12% | -0.15% | 0.04% | |
| NZD | 0.13% | 0.15% | 0.16% | 0.12% | 0.04% | 0.16% | 0.21% | |
| CHF | -0.06% | -0.06% | -0.03% | -0.09% | -0.15% | -0.05% | -0.19% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
Following his meeting with US Secretary of State Antony Blinken early Friday, China’s Foreign Minister Wang Yi said that the Sino-US “relationship has stabilized but negative factors are building.”
Additional comments
Sliding into conflict with the US would be a lose-lose situation.
We urge the US not to interfere with China's internal affairs.
In response, Blinken said that “there is no substitute for face-to-face diplomacy,” adding that “we need to avoid miscalculations.”
Blinken said that he “hopes the US and China can make progress on agreements, citing fentanyl, military-to-military ties and AI risks.”
Market reaction
At the press time, AUD/USD is holding higher ground near 0.6530, unperturbed by these comments. The spot is up 0.21% on the day.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
- WTI recovers to $83.60 in Friday’s early Asian session.
- The expectation that the Fed might delay rate cuts weighs on the black gold.
- The concern over oil supply disruptions amid renewed geopolitical tensions lifts the black gold.
Western Texas Intermediate (WTI), the US crude oil benchmark, is trading around $83.60 on Friday. The black gold edges higher as the market weighed the weaker-than-expected US economic growth data against a potential geopolitical risk from a looming Israeli invasion of the southern Gaza city of Rafah.
WTI prices face some sell-off following the GDP report from the Commerce Department on Thursday. The US economy expanded at its slowest pace in nearly two years in the first quarter (Q1) of 2024 as inflation rose at a faster pace. The advanced US GDP grew by 1.6% on an annualized basis in the first quarter (Q1) in 2024, compared to a 3.4% growth in Q4 2023. This reading came in below the market estimation of 2.5%. Additionally, the inflation in the United States remains elevated and it might trigger the speculation that the Federal Reserve will not cut interest rates before September.
However, WTI prices recover and hold positive ground after Treasury Secretary Janet Yellen said that US economic growth was likely stronger than suggested by weaker-than-expected quarterly data.
Apart from this, the concern over oil supply disruption amid the escalating geopolitical tensions boosts the black gold. Israel launched airstrikes on Rafah as the country made preparations to invade the city, per Reuters.
The worries about the largest drawdown in US commercial crude stockpiles since mid-January also lift the WTI prices. The Energy Information Administration (EIA) reported that crude inventories for the week ending April 19 fell by 6.368 million barrels from the previous reading of 2.735 million barrels built.
- The Japanese Yen struggles to register any recovery amid dovish BoJ expectations.
- The lack of action by Japanese authorities and softer Tokyo CPI also exert pressure.
- Traders keenly await the crucial BoJ decision ahead of the US PCE Price Index data.
The Japanese Yen (JPY) languishes near a multi-decade low against its American counterpart during the Asian session on Friday as traders keenly await the outcome of the highly-anticipated Bank of Japan (BoJ) policy meeting. After the historic decision in March to raise short-term interest rates for the first time in 17 years, the central bank is widely expected to leave policy settings and bond purchase amounts unchanged amid signs that inflation in Japan is cooling. This puts the market focus squarely on the quarterly inflation and growth forecasts, which will play a key role in influencing the near-term JPY price dynamics.
In the meantime, the lack of any decisive action by Japanese authorities to support the domestic currency fails to provide any respite to the JPY bulls. Meanwhile, the US Dollar (USD) hangs near a two-week low touched on Thursday in reaction to data showing a sharp slowdown in the US economic growth, which, in turn, caps the upside for the USD/JPY pair. That said, an unwelcome pickup in inflation reaffirmed market bets that the Federal Reserve (Fed) will keep interest rates higher for longer, which should act as a tailwind for the currency pair ahead of the US Personal Consumption Expenditures (PCE) Price Index.
Daily Digest Market Movers: Japanese Yen bulls remain on the sidelines ahead of BoJ and the key US macro data
- Government data showed on Friday that consumer inflation in Tokyo decelerated sharply in April and dashed hopes for any hawkish signals from the Bank of Japan, undermining the Japanese Yen.
- The headline Tokyo Consumer Price Index (CPI) rose 1.8% YoY in April, while core CPI (ex-Fresh Food, Energy) increased by 1.8% YoY during the reported month, both missing consensus estimates.
- A core CPI gauge that excludes both fresh food and energy prices and is closely watched by the BoJ as a gauge of underlying inflation fell below the 2% target for the first time since September 2022.
- From the US, the Commerce Department reported on Thursday that Gross Domestic Product grew at a 1.6% annualized rate in the January-March period, marking the weakest reading since mid-2022.
- This pointed to a significant loss of momentum at the start of 2024, though was offset by a rise in the underlying inflation, which reaffirmed bets that the Federal Reserve will keep rates higher for longer.
- A Jiji report indicated that the BoJ might buy fewer bonds, pushing Japan’s five-year bond yield to the highest level since April 2011, albeit does little to provide any meaningful boost to the JPY.
- Japan's Finance Minister Shunichi Suzuki reiterated that he is closely monitoring FX fluctuations and that he will prepare to take full steps on the currency, though declined to comment on details of the policy.
- Meanwhile, traders now seem reluctant and prefer to wait for the crucial BoJ policy decision, which will be followed by the release of the US Personal Consumption Expenditures (PCE) Price Index.
Technical Analysis: USD/JPY is likely to confront stiff resistance near 156.00 amid overbought RSI on the daily chart
From a technical perspective, momentum beyond the overnight swing high, around the 155.75 zone, has the potential to lift the USD/JPY pair to the 156.00 mark. The latter should act as a strong barrier and cap the upside amid the extremely overbought Relative Strength Index (RSI) on the daily chart, which, in turn, warrants some caution for bullish traders.
On the flip side, the 155.35-155.30 region is likely to protect the immediate downside ahead of the 155.00 psychological mark. This is closely followed by a short-term trading range resistance breakpoint, around the 154.70 area, below which the USD/JPY pair could drop to the 154.00 round figure en route to last Friday's swing low, around the 153.60-153.55 zone.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation.
The BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
On Friday, the People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead at 7.1056 as compared to the previous day's fix of 7.1058 and 7.2396 Reuters estimates.
Japan’s five-year bond yield rose to the highest level since April 2011 ahead of the Bank of Japan (BoJ) interest rate decision on Friday, per A Jiji. The yield advanced 2.5 basis points (bps) to 0.523% in the early Asian session on Friday.
The Bank of Japan (BoJ) is expected to leave its short-term rate target unchanged in the range between 0% and 0.1% on Friday, following the conclusion of its two-day monetary policy review meeting for April.
Market reaction
At the time of writing, USD/JPY is trading 0.02% lower on the day to trade at 155.62.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation.
The BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
- GBP/USD snaps the three-day winning streak near 1.2502 in Friday’s early Asian session.
- The US economy grew at a slower pace of 1.6% in Q1 2024, compared to 3.4% in the previous reading.
- The expectation that the BoE will cut rates before the US Fed might exert some selling pressure on the GBP.
The GBP/USD pair trades on a weaker note around 1.2502 during the early Asian trading hours on Friday. The modest rebound of the US Dollar (USD) weighs on the major pair despite weaker US GDP growth numbers. The US Personal Consumption Expenditures (PCE) Price Index data on Friday will be in the spotlight.
On Thursday, the US economy grew at a slower pace of 1.6% in the first quarter (Q1) of 2024, compared to 3.4% in the previous reading. This figure came in weaker than the market expectation of 2.5%. However, prices have remained sticky, with the data on Thursday revealing the Personal Consumption Expenditures Price Index in Q1 climbing at a 3.4% annual rate, above the Fed's 2% target. The Greenback has dropped to two-week lows near mid-105.00 after the release of weaker-than-expected Q1 GDP growth and a hotter-than-expected inflation reading.
According to the CME FedWatch tool, financial markets have priced in less than 10% odds that the US Federal Reserve (Fed) will cut interest rates in June, while the probability of a September rate cut dropping below 58%. Investors will take more cues from another inflation report on Friday. The US PCE is expected to show an increase of 0.3% MoM in both headline and core PCE figures. On an annual basis, the headline PCE and Core PCE figures are estimated to show a rise of 2.6% and 2.7% YoY, respectively.
On the GBP’s front, the Bank of England (BoE) Governor Andrew Bailey and other BoE policymakers stated that inflation in the United Kingdom dropped in line with the central bank's expectations and the risk of elevated inflation had reduced, paving the way for a rate cut. The market anticipates that the UK central bank will wait until next quarter to lower borrowing costs, and it will begin before the US Fed. This, in turn, might cap the upside of the Pound Sterling (GBP).
| Index | Change, points | Closed | Change, % |
|---|---|---|---|
| NIKKEI 225 | -831.6 | 37628.48 | -2.16 |
| Hang Seng | 83.27 | 17284.54 | 0.48 |
| KOSPI | -47.13 | 2628.62 | -1.76 |
| DAX | -171.42 | 17917.28 | -0.95 |
| CAC 40 | -75.21 | 8016.65 | -0.93 |
| Dow Jones | -375.12 | 38085.8 | -0.98 |
| S&P 500 | -23.21 | 5048.42 | -0.46 |
| NASDAQ Composite | -100.99 | 15611.76 | -0.64 |
| Pare | Closed | Change, % |
|---|---|---|
| AUDUSD | 0.6518 | 0.35 |
| EURJPY | 166.915 | 0.52 |
| EURUSD | 1.07292 | 0.3 |
| GBPJPY | 194.619 | 0.62 |
| GBPUSD | 1.25104 | 0.41 |
| NZDUSD | 0.59455 | 0.2 |
| USDCAD | 1.36546 | -0.37 |
| USDCHF | 0.91212 | -0.29 |
| USDJPY | 155.574 | 0.22 |
Japanese Finance Minister Shunichi Suzuki said on Friday that he is closely monitoring foreign exchange (FX) fluctuations. Suzuki further stated that he will prepare to take full steps on the currency. However, he declined to comment on forex and policy details.
Key quotes
“Declines to comment on forex and policy details.”
“We will take all necessary measures when needed.”
“He is closely monitoring currency fluctuations.”
“There are positive and negative elements of weak yen.”
“Prepared to Take Full Steps on FX.”
“Concerned about negative effects of weak yen.”
Market reaction
At the time of writing, USD/JPY is trading 0.02% lower on the day to trade at 155.72.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation.
The BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
FOREIGN EXCHANGE MARKET NEWS
CURRENCY MARKET DEFINITION
The concept of currency market has several definitions:
- Currency market is the sphere of economic relations that are manifested in the purchase and sale of currency values (foreign currency, securities in foreign currency), as well as operations related to the investment of capital in foreign currency;
- Currency market is a financial center where currency purchase and sale transactions based on supply and demand for them are concentrated;
- Curency market is a whole of authorized banks, investment companies, brokerages, exchanges, and foreign banks that perform foreign exchange operations.
- Currency market is a whole of communications systems that link banks in different countries that conduct international currency transactions.
Simply put, currency market is the market where currency transactions are made, that is, the currency of one country is exchanged for the currency of another country at a certain exchange rate. The exchange rate is the relative price of currencies of two countries or the currency of one country expressed in another country's monetary units.
Currency market is part of the global financial market, where many operations related to the global movement of capital take place.
TYPES OF MARKETS. RUSSIAN AND INTERNATIONAL CURRENCY MARKETS
There are international and domestic currency markets.
Domestic currency market — is a market within a single country.
The international currency market — is a global market that covers currency markets of all countries in the world. It does not have a specific site where trading is carried out. All operations within it are carried out through a system of cable and satellite channels that link the world's regional currency markets. Regional markets today include the Asian (with centers in Tokyo, Hong Kong, Singapore, and Melbourne), the European (London, Frankfurt am Main, and Zurich), and the American (New York, Chicago, and Los Angeles) markets.
Currency trading on the international currency market is carried out on the basis of market exchange rates, which are set on the basis of supply and demand in the market and under the influence of various macroeconomic data. Forex is the international currency market.
Currency markets can also be divided into exchange and over-the-counter markets. Exchange currency market is an organized market where trading is carried out through an exchange—a special company that sets trading rules and provides all the conditions for organizing trading under these rules.
Over-the-counter currency market — is a market where there are no certain trading rules, and purchase and sale operations are not linked to a specific place of trade, as opposed to the case of an exchange.
As a rule, an over-the-counter currency market is organized by special companies that provide services for the purchase and sale of currencies, which may or may not be members of the currency exchange. Trading operations in this market are now carried out mainly via the Internet.
The over-the-counter currency market is much larger than the exchange market in terms of trading volume. The Forex international over-the-counter currency market is considered the most liquid in the world. It operates around the clock in all financial centers of the world (from New York to Tokyo).
CURRENCY MARKET FUNCTIONS
Currency market— is the most important platform for ensuring the normal course of all global economic processes.
The main macroeconomic functions of the currency market are:
- creating conditions for the subjects of foreign exchange relations to make timely international current and capital payments and thereby promoting the development of foreign trade;
- providing conditions and mechanisms for the implementation of monetary and economic policy of the state;
- diversifying foreign exchange reserves;
- forming the exchange rate under the influence of supply and demand;
NEWS IMPACT
Various currencies are the main trading tool in the currency market. Exchange rates are formed under the influence of supply and demand in the market.
In addition to that, currency rates are influenced by many fundamental factors related to the global economic situation, events in national economies, and political decisions.
News about these factors can be found in various sources:
- Reports showing a country´s level of economic development.
The more stable an economy is developing, the more stable its currency is. Accordingly, it is possible to predict how the currency will behave in the near future, based on statistical data published in official sources of countries with a certain regularity.
This data includes:
- GDP
- unemployment;
- return on equity;
- consumer price index;
- industrial price index;
- propensity to consume;
- salaries outside of the agricultural sector;
- residential construction, etc.
Interest rate level, set by national authorities regulating credit policy, is an equally important indicator. In the European Union, this is ECB–the European Central Bank, in the US, this is the Federal Reserve System, in Japan—the Bank of Japan, in the UK—the Bank of England, in Switzerland—the Swiss national Bank, etc.
The interest rate level is determined at meetings of the national central bank. Then, the decision on the rate is published in official sources. If the central bank of a country reduces the interest rate, the money supply in the country increases, and the national currency depreciates against other world currencies. If the interest rate increases, the national currency will strengthen.
- Speeches of country leaders, leading economists and analysts.
A speech or even a separate statement by a country's leader can reverse a trend. Speeches on these topics may change the currency exchange rate:
- analysis of the situation on the currency market;
- changes in monetary or economic policy;
- adoption of a budget policy;
- forecasts of the economic situation, etc.
All this news is published in various sources. Major international news is more or less easy to find in Russian, but news related to the domestic economic policy and the economy of foreign countries is much less common in the Russian press. Mostly, such news is published by the national media and in the language of the country where the news is published.
It is very difficult for one person to follow all the news at once, and they are likely to miss some important event that can turn the whole situation on the market upside down. Guided by our main principle—to create the best trading conditions for our customers—we try to select the most important news from all over the world and publish them on our website.
The TeleTRADE Department of Analytics monitors news on most national and international news sources on a daily basis and identifies those that can potentially affect exchange rates. These are the main news items that are included in our news feed.
In addition, all our clients have free access to the Dow Jones news feed. This is a joint project of Dow Jones Newswires, the world's largest news agency, and the leading Russian news agency Prime-TASS. The news feed is created specifically for currency traders and those who are interested in getting information about the world's currency markets.
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