By www.CentralBankNews.info Rwanda’s central bank expects headline inflation to continue to ease in the second half of this year and not exceed 7.5 percent by December.
The National Bank of Rwanda (BNR) also said in its Monetary Policy and Financial Stability Statement that economic activity in the second quarter and prospects for the second half of this year indicate that the economy will continue to grow as planned.
In the first quarter, Rwanda’s economy expanded by an annual 5.9 percent, in line with the 7.5 percent growth that is projected for the full year, but down from 8.8 percent in the fourth quarter.
“Going forward, BNR will continue to closely monitor development in underlying factors of inflation so as to take appropriate measures to limit inflationary pressures, using the monetary policy instruments,” the central bank said.
Rwanda’s inflation rate rose to 3.7 percent in June from 2.98 percent in May and compared with 5.9 percent in June 2012.
In June the BNR cut its repo rate by 50 basis points to 7.0 percent, the first change since May 2012 when it raised its rate.
What is going down in Yemen?
Article by Investazor.com
On Tuesday, the United States told its citizens in Yemen to immediately leave the country. The official announcement on the U.S. State Department was: “The Department urges U.S. Citizens to defer travel to Yemen and those U.S. Citizens currently living in Yemen to depart immediately.”
Moreover, it seems that all diplomatic missions of the United States across the Middle East are to be closed these days, following warnings of potential attacks coming from the zone. Important communication between bin Laden’s successors as al Qaeda leader, Ayman al-Zawahri, and the Yemen based wing were intercepted by U.S. Secret Services. It is strongly believed that the terrorist attacks are oriented against the U.S. because of some drone aircraft strikes that took place lately in Yemen.
Even if Yemen is one of the poorest Arab country, the intensity of the threat must not be neglected, and measures already appeared in the whole Western countries. Great Britain also took initiative by advised its citizens in Yemen to “leave now” and by “temporarily evacuating all its embassy staff” (according to Reuters).
Given this context, it is important to analyze how the events can influence, on a short term period, the economic relations between Yemen and the United States. As we mentioned before, Yemen is not a rich country, but it has established diplomatic relations with the U.S. in 1947. It is not competing with other Arabic countries from the economic point of view, nor from the natural resources aspect.
Its oil reserves and natural gas deposits, on which the Yemeni economy is totally dependent, are important in the agreements between the two countries. However, the oil reserves in Yemen are expected to be depleted by 2017, possibly bringing on economic collapse. At this point, we can now argue whether these reserves are enough for the U.S. to keeping wanting the country close in a diplomatic manner.
The rupture announced these days does not seem so big as to have effects on the oil’s price on the international market. However, the announcement made by the U.S. about the closure of all diplomatic relations across the Middle East could raise questions and produce signals in financial markets. It is a situation to be closely followed, because consequences on short periods of time can appear and can also give birth to long term consequences on the financial markets, as the politics are strongly related to economics all over the world.
Depending on the consequences of these threats, which may prove false or true, we will be able to provide the economical consequences, at least in terms of oil prices. Of course, the position of the U.S. to these events is not negligible, but we might take into account that a total and irreversible retreat of them from Yemen is not possible, because of strategic reasons on which the United States are counting.
The post What is going down in Yemen? appeared first on investazor.com.
EURUSD Dragged Towards 1.34 on QE Continuity
Article by Investazor.com
Last week the FOMC statement showed that Federal Reserve officials are still on the Quantitative Easing side. It seems that the QE is expected to be shut down only if the unemployment rate will drop to 6.5% or if the inflation rate will rise 0.5% above the medium target. Keeping in mind that the United States has an unemployment rate at 7.4% we can say that it might take a while until the end of the program or at least until the tapering. On Thursday the unemployment claims surprised with a value of 326K (under estimates) while on Friday the Non-Farm Payrolls came at 162K, with 20K lower than the forecast.
On Thursday the ECB maintained the interest rate a record low 0.50%. The main ideas from Draghi’s press conference were: the ECB will continue to keep low interest rates and high liquidity, will keep the door open for new rate cuts and forecast a slow recovery at the end of the year and in 2014.
The latest economic releases for the Euro Area were mainly above expectations: a lower unemployment rate, higher PMIs for both manufacturing and services sectors and better industrial production for Germany.
Chart: EURUSD, Weekly
Looking at the EURUSD we can see that the pressure is now on the upper line of a symmetrical triangle. Last week was a Doji candle above 1.3200. If this week will close above 1.3345, last week’s high we might see a rally toward 1.34 or why not even higher to 1.35. A false breakout above 1.34 could signal a reversal.
The post EURUSD Dragged Towards 1.34 on QE Continuity appeared first on investazor.com.
Central Bank News Link List – Aug 6, 2013: India names Rajan central bank governor as rupee plunges
By www.CentralBankNews.info Here’s today’s Central Bank News’ link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don’t miss any important news.
- India names Rajan central bank governor as rupee plunges (Bloomberg)
- Fed could taper in September but doesn’t have to : Lockhart (Reuters)
- Fed’s Evans: QE taper quite likely later this yr, month not set (MNI)
- Turkish lira gains as central bank points to currency risk on inflation (Reuters)
- BSP has room to adjust policy if needed (Reuters)
- ECB has easing bias, not out of ammunition: Praet (Reuters)
- Russia stocks drop 3rd day on bets central bank won’t cut rates (Bloomberg)
- Kenyan central bank sees economy benefiting from weak shilling (Bloomberg)
- Preview: Analysts see BOE forward guidance using jobless rate (MNI)
- Norway banks need more freedom to lend, says Solberg (Bloomberg)
- Fed’s Fisher gently pokes at Summers’ bid to lead central bank (MarketWatch)
- Belarus central bank to continue rigorous monetary policy in H2 2013 (Belta)
- Zimbabwe won’t return to local currency, central bank head says (Bloomberg)
- www.CentralBankNews.info
A Tale of Two Markets
Lately, China has been on something of a stealth mission in Detroit. And the timing is no coincidence. You see, there’s an ancient Chinese proverb that says, “A crisis is an opportunity for riding the dangerous wind.” And Chinese investors are taking this idea to heart.
Just look at Shanghai Auto (SAIC U.S.A.). Though it employs only 20 Detroit engineers, SAIC caught the collective car industry off-guard when it opened offices in Birmingham, a Detroit suburb.
For SAIC, the biggest selling point is a large, experienced pool of workers who were laid off during the past few years. The company’s goal is to sell Chinese-made cars on a mass scale in the United States.
SAIC isn’t alone on its mission, either…
Chang’an U.S. Research and Development Center Inc. set up a research and development shop in Michigan in 2011.
Wanxiang Group Corp. bought battery maker A123 Systems Inc.
Another 50,000 Chinese professionals work at GM (GM) and Ford (F), and live in the metropolitan area. The Ford Chinese Association, with its 650 white-collar workers, has become one of Ford’s largest employee groups.
And the Detroit Chinese Business Association’s flourishing membership includes 100 local, Chinese-owned businesses – mostly auto-related.
Who can blame the Chinese for moving in at this point? There are certainly some “dangerous winds” in Detroit these days.
I prefer, however, to put my faith (and investment dollars) into a couple of tried-and-true American staples.
The Chinese may be making moves in Detroit. But that doesn’t mean that American automakers are stuck in idle.
On the contrary… GM and Ford posted their highest sales levels since June 2008 and June 2006, respectively. And best of all, they plan to do some invading of their own… in China.
Buy Red, White and Blue
That’s right. Just as the Chinese are moving in on Detroit, U.S. automakers are doing exactly the opposite. And it’s no surprise why…
Ford estimates that by 2020, one billion Chinese will be able to afford to buy cars. And the company has positioned itself perfectly. Today, Ford is the fastest-growing international car company in China, with a 12.6% hike in the first five months of 2013. The company is shooting for additional market share growth of 6% by 2015 and 7.5% by 2020.
Two new SUVs – the Kuga and Explorer – are driving Ford’s rapid growth. And the company plans to invest $4.9 billion through 2015 to double production capacity to approximately 1.6 million vehicles.
Ultimately, Ford plans to one day generate 40% of its global sales from China.
In comparison, GM saw 11% year-over-year growth, and it remains the biggest foreign auto company in terms of total vehicle sales. It sold around 1.3 million in the first five months of 2013, and the company expects to sell as many as three million vehicles before the year’s end.
GM is also planning an $11-billion investment to build four new plants, including a $1.3-billion Cadillac plant that just broke ground in China. In the meantime, the company will launch at least 10 new or revamped models every year through 2016, aiming for a production capacity of five million cars.
My take? I’d say investors in Ford and GM will fare much better than their Chinese counterparts chasing profits in downtown Detroit.
Ahead of the tape,
Karen Canella
The post A Tale of Two Markets appeared first on | Wall Street Daily.
Article By WallStreetDaily.com
Original Article: A Tale of Two Markets
Are markets looking at the recovery through rose-colored glasses?
Are markets looking at the recovery through rose-colored glasses? (via Futures Magazine)Overview and Observation; The rhetoric from Washington continues to run rampant. The “glee” associated with the monthly jobs “created” figure ignoring the weekly first time unemployment number is a painfully obvious “exclusion” of reality. The jobs…
The S&P 500 is Plagued with Divergences
By J.W. Jones, OptionsTradngSignals.com
By now everyone has a prediction about where the S&P 500 Index (SPX) is going to be heading in the future. Most of the sell side and their ilk are all rolling out the green bullish carpet and predicting that a major bull run is right around the corner.
I am a contrarian investor by nature and I tend to sell when others are buying. When retail investors are buying and the professional sell-side is quickly reducing their long equity exposure I get increasingly more bearish. A recent report from Zerohedge shown here, was accompanied by the charts shown below courtesy of Bank of America Merrill Lynch:
As can clearly be seen above, retail investors have been strong buyers as of late while the institutional or professional investors have been sellers. The institutions almost always are net sellers near market tops while the retail crowd buys up the professionals’ inventory at high prices only to sell lower. The sheep are coming to the slaughter, they just do not know it yet.
Using a more quantitative methodology, it becomes apparent that the probabilities are not favorable for a significant bull run to emerge as we edge toward the back half of the year.
As a professional options trader, I focus on probabilities to help guide my investment thesis. One of my favorite underlying indexes to monitor for probability based moves is the S&P 500 Index (SPX).
The probabilities shown below were derived from statistical calculations based on the SPX option chain that will expire December 31, 2013.
As can clearly be seen above, the probability that price will close at the end of this year above 1,750 on the S&P 500 Index (SPX) as of Monday’s close was roughly 35%. Based on current implied volatility, there is a nearly 72% chance that we will trade up to 1,750 before the year is over at some point in time.
Again, referring to the SPX option chain shown above, there is a 20% probability that price will close above 1,800 on the last day of the year with only a 41% chance that price will reach 1,800 at any point from now until December 31, 2013.
The numbers go down considerably when we begin to look at the probabilities of reaching 1,850 on the SPX. The probability that price closes above 1,850 at the end of this calendar year is less than 10%. However, the probability we touch the 1,850 price level at some point later this year is around 20% based on current implied volatility levels.
The SPX option chain is telling us that this monstrous move is unlikely to be able to hold through the end of the year based on current implied volatility levels. Clearly these levels will adapt to market conditions as they change every day during normal market hours, but at this point they are not providing a strong indication of significantly higher prices before year end.
By now readers are probably expecting me to make a prediction about where prices are going to be headed. I do not do specific predictions because I do not feel that I know anymore than anyone else regarding future price action. However, I do believe we are closing in a topping pattern that is likely to give us a strong correction sometime before year end.
In addition to the professional versus retail investor charts and probability based determinations for future price expectations, there are two more indicators which are showing a divergence or a non-confirmation signal from the price action in the S&P 500 Index (SPX).
As shown below, the money flow indicator has failed to break to new highs as of today (Monday) which thus far fails to confirm the recent move to new highs in the S&P 500 Index (SPX).
The chart above does not require much explanation. The last time we witnessed a major divergence was in the autumn of 2011 which culminated into a nasty correction.
In addition to the divergence shown above in the Money Flow Indicator, there is also a strong non-confirmation signal in the NYSE Advance / Decline Index which is shown below.
I want to be clear to readers that I am not trying to imply that prices are going to collapse tomorrow or even in August or September. I am simply trying to point out through the use of a variety of analytical methodologies that buying here is a rather risky endeavor.
While more upside may await in the short-term, the intermediate term could be plagued by strong selling pressure. One thing is certain, I expect the selling pressure to come out of nowhere and the retail crowd will most certainly be left holding the bag. Risk is high.
If you are looking for a mathematical and statistical based approach to trading, OptionsTradingSignals.com may be a perfect fit to improve your option trading results. Give OptionsTradngSignals.com a try today!
This material should not be considered investment advice. J.W. Jones is not a registered investment advisor. Under no circumstances should any content from this article or the OptionsTradingSignals.com website be used or interpreted as a recommendation to buy or sell any type of security or commodity contract. This material is not a solicitation for a trading approach to financial markets. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for educational purposes only.
Majors Continue Consolidating
EURUSD – The EURUSD Unable to Increase Above Figure 33
Yesterday, the EURUSD tried to attack the 33rd figure once again, without success again. The pair was being sold there, as a result it returned to the support near 1.3264, broke it through and dropped to 1.3232. After that, there was a pullback to 1.3271, today the euro is under pressure again, and it is decreasing again. Thus, it is not necessary to talk about any changes in the overall picture of the pair so far, since it continues consolidating. The inability to get up and consolidate above the 1.3306 inspires the pair bears, but they still fail to develop an upward movement. However, this situation cannot last forever, and the range may broken though at any moment with the following strong movement in a particular direction. There on the daily, weekly and monthly timeframes the Parabolic SAR is below the price chart, suggesting, but not guaranteeing, the prices’ breakdown in the upward direction. In this case, it will be possible, even with a high degree of probability, to predict the development of a high-grade upward trend towards the February highs at 1.3710. But the loss of the support near 1.3200-1.3176 will confirm that the downward trend in the EURUSD remains in force.
GBPUSD – The GBPUSD Increase to 1.5377
The GBPUSD managed to continue increasing – it was contributed by the passing of the resistance around 1.5300. This has increased the upward momentum, and as a result we have saw the pair’s increase to the next resistance at 1.5377. After that, there was a pullback to 1.5320, but the remained in demand at this level, and returned to yesterday’s highs. The sentiment is still positive, but the bulls still have to overcome the resistance proximity of 1.5377 – 1.5434, the level of 1.5434 is the July high. Until it has been passed, risks of the renewed downward momentum remain, and the loss of the 52nd figure would significantly worsen the pair’s further outlook.
USDCHF – The USDCHF Continues Consolidating
The dollar has increased above the 0.9307 resistance being paired Swiss franc, but having reached 0.9332, it came under pressure and dropped to 0.9268. In the Asian session, the decrease continued, and as a result the dollar nearly reached the level of 0.9245, but soon it began to recover and has already approached the 93rd figure. The USDCHF decrease was largely caused by the decrease in the EURCHF. However, there has been no changes to the overall picture of the pair, since the USDCHF continues consolidating in the formed range. Its breakthrough would mean the development of a strong trend towards the breakdown, thus trading in the range should be terated with an extreme caution and it is also wise to mind false breakouts when placing stops.
USDJPY – Current Support in the USDJPY Hinders the Downward Correction Development
Having failed to stay above the 99th figure, the USDJPY continued decreasing until it reached the level of 98.28 with the following rebound to 98.77, but the sales interest due to the growth has remained, and the pair dropped to 97.83, where the dollar was bought, recovered and increased to 98.51. It is possible that at this stage, the dollar is forming the basis near the 98th figure, and in this case, we should expect the uptrend resumption. This would be confirmed by the pair’s growth and the ability to consolidate above the 99th figure. The loss of the support near 97.60 would mean that the downward correction is still valid.
Disadvantages of Trading Binary Options
Traders who enter the market of binary options are able to make a fair sum of money from it. Like all trading in the financial market, the profits you show can as easily become losses. There are inherent risks involved in the trading market and you should be aware of the disadvantages linked to trading before you invest your money into it.
Risk Level Settings
In binary options trading, traders do not have the same facilities as those in the foreign currency exchange market. In the currency exchange market traders have the option to trade with a micro or mini accounts which limits their risk levels. In the binary options market, brokers have a minimum trading limit. This places you at more risk of losing your entire capital amount when you trade in this market.
For example, in forex you may be allowed to open a mini account with about $250. This allows you to limit your risks accordingly. In the binary market, you generally will not find brokers who give you the option to trade anything below $50, even if you hold an account of $250. This means that if you are unlucky enough to experience five losing trades, your account will be wiped out.
Trade Adjustments
Traders in the commodities and foreign exchange markets have the option to close their trades when it hits a loss situation and commence with opening another potentially profitable one. This is possible if the trader made a mistake when placing or exiting the first trade. It is not possible to do this in the binary options market.
As soon as an options trade has been placed, the amount in the trade is reduced to show the commissions which have been levied by the broker. The payout available on the trade that is reversed is fixed and it cannot be used effectively to cover any losses from the incorrect trade.
Trading Tools
Many of the binary brokers do not offer their clients the necessary trading tools, such as technical analysis or charts. This means that most traders are actually doing all their trades in the dark, particularly newcomers to the market. The more experienced traders have means of obtaining these tools elsewhere, especially if they are already trading in other financial markets.
Trading Odds
The trading odds are taken into account for trades done in this market. This causes the payouts for trades to be reduced by significant amounts if the odds for the success of a trade are extremely high. Some traders have experienced instances where they have earned 80% payouts on trades, but these are only available when you have set an expiry date way into the future from the commencement date of your trade. This puts you at more risk as the trades take on a more unpredictable nature.
This is an indication that binary options trading may be profitable, but it also carries distinct disadvantages that you should be aware of at all times. Bearing these points in mind will give you the opportunity to trade effectively and show long-term profits.
What’s Next for the Euro?
By The Sizemore Letter
A year ago, European Central Bank chief Mario Draghi promised to “do whatever it takes” to save the euro. The reality is that he hasn’t done much of anything. He hasn’t had to.
The Outright Monetary Transactions bond-buying scheme—which was designed to calm the bond markets by buying potentially unlimited amounts of Eurozone periphery-country bonds in the secondary market—was put together after Draghi’s comments but has yet to be implemented. Its mere existence—and Draghi’s perceived eagerness to use it—were enough to put the bond market as ease.
In the year that has passed, the Spanish 10-year bond yield—which has become a de facto measure of investor sentiment towards the Eurozone—has collapsed from 7.8% to 4.6% at time of writing. It had fallen to as low as 4.0% in May, until Fed Chairman Ben Bernanke’s QE “tapering” comments caused a general world-wide hike in bond yields.
Italy’s bonds have fared even better. Despite a political crisis brewing in Italy that could see former prime minister Silvio Berlusconi jailed and barred from office—and bring down Italy’s coalition government in the process—Italy bond market remains healthy, and the 10-year yield sits at a manageable 4.4%.
As fears that the Eurozone would implode continued to build throughout late 2011 and the first half of 2012, the euro lost nearly 20% of its value relative to the dollar. But as fears of a meltdown receded, the euro rallied, notching up gains of about 13% vs. the dollar before settling into a trading range that has lasted for most of 2013.
So, where does the euro go from here?
There are a lot of moving parts, but let’s look at some of the most critical drivers one by one.
1.All else equal, an improving Eurozone economy should give investors faith that the worst is over for Europe. Improving sentiment means new money flowing into Europe…which should point to a stronger euro. On this count, we see what could be the first green shoots of recover. European oil consumption is rising for the first time in two years, and the Spanish unemployment rate—though still shockingly high at 26.3%–ticked down for the first time in two years last quarter.
2. The “carry trade” is a major determinant of currency moves. All else equal, higher-yielding currencies tend to rise relative to lower-yielding currencies. Currency traders short the lower-yielding currency and buy the higher-yielding currency, hoping to profit both from the spread between the two interest rates and from appreciation in their long currency. Right now, the Fed Funds rate is effectively zero (it’s official target is 0.00% – 0.25%). Bernanke has indicated that rates will remain close to these levels for “the foreseeable future,” which is taken to mean through at least the end of 2014.
The ECB’s target rate is slightly higher, at 0.50%, but not high enough for the spread to be much of a factor. At best, the euro is slightly less likely to be used as a funding currency than the dollar or yen. Overall, I consider the carry trade to be neutral for the euro.
3. Lower inflation generally leads to an appreciating currency, all else equal. And on this count, I see a mild positive for the euro. Inflation in the Eurozone can in at 1.6% last month, and core inflation was just 1.2%. In the U.S., the numbers were 1.8 and 1.6, respectively. I expect inflation to remain tame in both the U.S. and Europe, though when inflation does eventually start to trend upward again I expect it to happen in the U.S. first.
4. A positive trade balance is good for a currency, all else equal, and this metric favors the euro. While five years of economic malaise have brought the American current account deficit down to just 2.7% of GDP, the Eurozone has a current account surplus of about 2% of GDP.
The numbers suggest that the euro should enjoy modest gains against the dollar over the next year, or at the very least continue to trade near the upper end of its recent trading range. Of course, all of this could go out the window in an instant if Italy or Spain slide into political crisis again or if the bond markets revolt as they did early last year.
Trading “near the upper end of its recent trading range” is not a ringing endorsement of a long-euro trade. But given the likelihood of relative stability in the euro, a strong case can be made for European equities. Taken as a group, European stocks are substantially cheaper than their American counterparts and tend to pay higher dividends.
This article fist appeared on MarketWatch.
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