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Posted: 24 Aug 2013 08:28 PM PDT
Here’s an interesting little weekend item on High Frequency Trading algorithms, in which the writer says that the best HFT firms now trade in around 2 microseconds (“context: sound takes about 150ish microseconds to travel from the back of your throat to your mouth”) in signal to trade time, and that doing advanced calculation work on a computer takes a lot longer than that… and thus
- The strategies employed by the most advanced HFT firms are shockingly simple in terms of Maths or Stats: think exponential moving averages, with a handful of if statements and safety checks…
- when faced with the decision to produce a reliable, stable strategy that provides good liquidity, or simply the fastest adequate one possible, speed wins every time.
More here
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Posted: 24 Aug 2013 07:46 PM PDT
Not surprisingly, the most difficult of Abe’s three arrows is proving to be reform of the Japanese economy. This time its resistance to medical sector reforms from within Abe’s constituency, in this case Japan’s doctors:
The reform plans include changes to Japan’s universal health insurance system.
Says Reuters:
- On one side of the argument is the 165,000-member JMA and health ministry officials, who say they want to protect the cherished principle of universality in a system that has been the envy of much of the developed world.
- Lined up against them, and pushing Abe to go further, are advocates of more radical reform who accuse the small family doctors who make up the bulk of the JMA’s membership of wanting protection from competition from larger clinics and hospitals.
- The JMA also worries that Abe’s push for Tokyo to join the U.S.-led Trans-Pacific Partnership (TPP) free trade pact would give impetus to such changes if Washington pushes in negotiations for market-oriented reforms to healthcare
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Posted: 24 Aug 2013 07:38 PM PDT
Bank of Japan Governor Haruhiko Kuroda said monetary easing by a central bank does not necessarily lead to cross-border capital outflows from that country, saying:
- “Almost all base money provided through monetary policy will be accumulated in the form of deposits with a central bank”
- “Even if a country eases monetary conditions, this does not necessarily mean that money being provided directly ‘spills over overseas’”
There is (a little) more here at Reuters.
Kuroda’s comments are interesting in light of the falling markets and currencies in emerging markets, which has blamed on imminent winding-back of Federal reserve asset purchases
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Posted: 24 Aug 2013 07:09 PM PDT
Minneapolis Federal Reserve Bank President Naryana Kocherlakota said:
- it is “really a stretch to think” that the Fed has lowered rates too much
- Given the high rates of unemployment and low levels of inflation, “I think what we’re seeing is that we have not been able to lower rates as much as we’d like to”
- Says the Fed will need to maintain a highly stimulative monetary policy for some time to come
More at MNI
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Posted: 24 Aug 2013 06:59 PM PDT
4,000 people have taken part in a US version of Spain’s running of the bulls in Pamplona.
- Its part of a 10-city bull-running tour
- It cost $30 to take part in the run ($30 is really cheap to dodge the bulls, just ask all the stockmarket bears over the past 4 years
 )
- The run is over a quarter mile dirt track
More here: Four thousand run from the bulls in Virginia event
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Posted: 24 Aug 2013 06:53 PM PDT
Michael Bloomberg has handed out some tips on his formula for success:
- You make your own luck
- The harder you work, the luckier you get
- Try to be the first one in in the morning and the last one to leave at night
- Take the fewest vacations
- Take the least time away from the desk to go to the bathroom or have lunch
More: Mayor Bloomberg: Bladder Control Helped Me Become A Billionaire
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Posted: 24 Aug 2013 06:49 PM PDT
A paper presented at the Jackson Hole central banks symposium on August 24 2013says emerging market nations “can be adversely affected by large swings in investment, and must therefore develop tools to control credit flows or risk relinquishing any independent monetary policy”.
Quite a timely paper given the fall in emerging markets and their currencies since the imminent Fed ‘taper’ has come to broad market acceptance.
More here at Reuters
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Posted: 24 Aug 2013 06:44 PM PDT
- Angelino Alfano, secretary of Berlusconi’s People of Freedom (PDL) warned Prime Minister Enrico Letta this week that the party could bring down the government if the center-left Democratic Party (PD) voted to throw Berlusconi out
- There is a vote due in September on whether to expel Berlusconi from parliament
More threats and intimidation here
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Posted: 24 Aug 2013 06:40 PM PDT
European Central Bank Executive Board member Joerg Asmussen has told Greek newspaper To Vima that Greece can achieve a primary budget surplus this year and growth in 2014 if it sticks to economic reforms.
- Asmussen was in Athens this week to meet senior government officials.
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Posted: 24 Aug 2013 06:35 PM PDT
Bank of Japan Governor Haruhiko Kuroda, speaking during a panel discussion on unconventional monetary policy at Jackson Hole said:
Bank of Japan’s policy measures have already started to exert their intended effects
The BOJ embarked on a policy of " Quantitative and Qualitative Monetary Easing" back in early April, part of which involves buying around 7 trillion yen ($US70.9 billion) in bonds each month to expand the monetary base by 60 trillion yen to 70 trillion yen per year.
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Posted: 24 Aug 2013 06:34 PM PDT
Atlanta Federal Reserve Bank President Dennis Lockhart, speaking on the sidelines of the annual monetary policy symposium in Jackson Hole said:
“I can get comfortable with September, providing we don’t get any really worrisome signals out of the economy between now and the 18th of September”
“The data are essentially a way of testing a basic set of assumptions. And I can get comfortable with an initial step in terms of tapering, as long as I am comfortable that we are on that basic flight path for the economy,”
There’s that data-dependency talk again.
The next FOMC meeting is September 17-18. Primary dealers expect the Fed to slow the pace of asset purchases by $15 billion in an announcement after this meeting.
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Posted: 24 Aug 2013 06:33 PM PDT
The second day of the two-day Jackson Hole symposium was devoted to central bankers debating the threats posed by global liquidity.
Reuters have an interesting article covering some of the points made, with much focus on the flood of money into emerging markets courtesy of ultra-cheap liquidity, a flood that is now receding and triggering slides in emerging markets their currencies.
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Posted: 24 Aug 2013 06:32 PM PDT
Plenty of comments out of Jackson Hole this weekend:
- Bank of England Deputy Governor Charlie Bean said a tightening in U.K. gilt yields should be restrained by its pledge not to consider raising interest rates before unemployment falls to 7 percent.
Also:
- The knowledge that monetary policy will not be tightened until the U.K.'s fledgling recovery is secured should boost confidence
The Bank of England gave forward guidance by projecting it will keep its benchmark rate at 0.5 percent until late 2016 as it waits for the jobless rate to fall from 7.8 percent.
Bloomberg, and Reuters
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Posted: 24 Aug 2013 06:31 PM PDT
Australia's opposition Liberal-National coalition has been in front for all of the campaign so far, and is widening its lead, according to a Herald-Nielsen poll published in the Sydney Morning Herald newspaper Saturday:
- Support for the coalition rose to 53 percent on a two-party preferred basis (from 52 percent two weeks earlier), putting the ruling Labour party down one point to 47 percent
As I’ve said before, market perceptions are that a win for the current opposition will give a sentiment boost, which should be a positive for the economy (at least in the short-term), and that the market also wants to see a clear win for a majority government. The current Australian government is a minority government, and has run a full 3 year term in government with support from a handful of independents
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Posted: 23 Aug 2013 12:10 PM PDT
Forex headlines for August 23, 2013:
- Surprise 13.4% plunge in July US new home sales
- Canada July CPI +1.3% vs 1.4% expected
- Fed's Lockhart 'would be supportive' of Sept taper if data strong
- Fed's Bullard sees no rush to taper
- Fed's Williams expects 'significant' uptick in GDP later this year and in 2014
- Bean says QE remains an option for Bank of England
- European August consumer confidence -15.6 vs -16.5 expected
- ‘New Normal’ downgraded
- Gold gains $21 to $1397
- US 10 year yields down 6 bps to 2.82%
- AUD was the top performer while NZD lagged
The US dollar puked up the new home sales headlines. Not only was the July number bad, the three previous months were revised lower. The talk is that rising mortgage rates could snuff out the housing recovery, which is the only real sign of strength in the US economy.
The euro was quick to take advantage, climbing in a straight line to 1.3411 from 1.3340. It’s drifted back but a close above 1.3346 would be the highest since early February.
USD/JPY dropped on the new home sales headline but a strong layer of real money bids down to 98.40 cushioned the blow. Eventually the dollar rebounded to 98.70.
USD/CAD touched a multi-week high at 1.0568 but couldn’t climb higher despite softer-than-expected Canadian CPI numbers. When USD/CAD couldn’t rise on good news, the selling started and it was compounded by the US home sales flub.
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Posted: 23 Aug 2013 11:30 AM PDT
There’s a commodity currency race to the bottom underway.
- USD/CAD up 6 straight days in 2.66% rise
- NZD/USD down 5 straight days in a 4.9% decline
The Canadian dollar decline has been longer but the kiwi decline is a much larger magnitude.
Looking at the charts, both fell from the 100-day moving average and are nearing support/resistance.
USDCAD daily chart. The June high was 1.0610.
NZD/USD daily chart. 0.7692 was the June/July low
If you had to pick one, it’s tough and if you want to trade NZD/CAD, your broker will love you.
A few thoughts.
- Both are overdue for a rally but CAD looks a bit better to me.
- A good trade may be to wait for a break of 0.7692 in NZD/USD and sell it.
- This comes in a period where USD hasn’t been particularly strong so if that side of the equation gets moving, this could be just the tip of the iceberg.
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Posted: 23 Aug 2013 11:01 AM PDT
The Swiss franc was the best performer this week while the kiwi lagged. In the past 5 trading days, the pair gained a whopping 4.26% or 306 pips.
I don’t think I’ve ever looked at the NZD/CHF chart but it’s an interesting one as the kiwi tests the bottom of the recent range.
NZD/CHF weekly chart
What do you think will be the best trade next week?
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Posted: 23 Aug 2013 10:38 AM PDT
Let’s wait until we see what the politicians have in store to scuttle it.
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Posted: 23 Aug 2013 09:48 AM PDT
Bernanke is a few months from retirement and academic economists are now dumping all over his signature policy — quantitative easing.
“You mean to tell me I spent $3.65 trillion for nothing?”
Write a funny caption — one that will at least make me exhale forcefully through my nose — and I’ll mail you a ForexLive mug.
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