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Kamis, 27 Oktober 2011

usbank.com

U.S. Bank® Products & Services Products and Services U.S. Bank products and services are designed to help you achieve your financial goals. Apply for one or more of our products today. Many of our checking accounts and credit cards offer instant approval. Source : © 2011 U.S. Bancorp
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The World Bank

What Is The World Bank? The World Bank Group (WBG) was established in 1944 to rebuild post-World War II Europe under the International Bank for Reconstruction and Development (IBRD). Today, the World Bank functions as an international organization that fights poverty by offering developmental assistance to middle-income and low-income countries. By giving loans and offering advice and training in both the private and public sectors, the World Bank aims to eliminate poverty by helping people help themselves. Under the World Bank Group, there are complimentary institutions that aid in its goals to provide assistance. Tutorial: Economics Basics Membership There are 184 member countries that are shareholders in the IBRD, which is the primary arm of the WBG. To become a member, however, a country must first join the International Monetary Fund (IMF). The size of the World Bank's shareholders, like that of the IMF's shareholders, depends on the size of a country's economy. Thus, the cost of a subscription to the World Bank is a factor of the quota paid to the IMF. There is an obligatory subscription fee, which is equivalent to 88.29% of the quota that a country has to pay to the IMF. In addition, a country is obligated to buy 195 World Bank shares (US$120,635 per share, reflecting a capital increase made in 1988). Of these 195 shares, 0.60% must be paid in cash in U.S. dollars while 5.40% can be paid in a country's local currency, in U.S. dollars, or in non-negotiable non-interest bearing notes. The balance of the 195 shares is left as "callable capital," meaning the World Bank reserves the right to ask for the monetary value of these shares when and if necessary. A country can subscribe a further 250 shares, which do not require payment at the time of membership but are left as "callable capital." (Learn more about the IMF in An Introduction To The International Monetary Fund.) The president of the World Bank comes from the largest shareholder, which is the United States, and members are represented by a Board of Governors. Throughout the year, however, powers are delegated to a board of 24 executive directors (EDs). The five largest shareholders - the U.S., U.K., France, Germany and Japan - each have an individual ED, and the additional 19 EDs represent the rest of the member states as groups of constituencies. Of these 19, however, China, Russia and Saudi Arabia have opted to be single country constituencies, which means that they each have one representative within the 19 EDs. This decision is based on the fact that these countries have large, influential economies, which requires that their interests be voiced individually rather than diluted within a group. The World Bank gets its funding from rich countries as well as from the issuance of bonds on the world's capital markets. The Parts That Make Up the Whole The IBRD offers assistance to middle income and poor but credit worthy countries, and it also works as an umbrella for more specialized bodies under the World Bank. The IBRD was the original arm of the World Bank that was responsible for the reconstruction of post-war Europe. Before gaining membership in the WBG's affiliates (the International Finance Corporation, the Multilateral Investment Guarantee Agency and the International Center For Settlement of Investment Disputes), a country must be a member of the IBRD. The International Development Association offers loans to the world's poorest countries. These loans come in the form of "credits," and are essentially interest-free. They offer a 10-year grace period and hold a maturity of 35 years to 40 years. The International Finance Corporation (IFC) works to promote private sector investments by both foreign and local investors. It provides advice to investors and businesses, and it offers normalized financial market information through its publications, which can be used to compare across markets. The IFC also acts as an investor in capital markets and will help governments privatize inefficient public enterprises. The Multilateral Investment Guarantee Agency (MIGA) supports direct foreign investment into a country by offering security against the investment in the event of political turmoil. These guarantees come in the form of political risk insurance, meaning that MIGA offers insurance against the political risk that an investment in a developing country may bear. Finally, the International Center for Settlement of Investment Dispute facilitates and works towards a settlement in the event of a dispute between a foreign investor and a local country. (Learn more in What Is An Emerging Market Economy?) Adapting to the Times As mentioned earlier, the main function of the WBG is to eliminate poverty and to provide assistance to the poor by offering loans, policy advice and technical assistance. As such, the countries receiving aid are learning new ways to function. Over time, however, it has been realized that sometimes as a nation develops, it requires more aid to work its way through the development process. This has resulted in some countries accumulating so much debt and debt service that payments become impossible to meet. Many of the poorest countries can receive accelerated debt relief through the Heavily Indebted Poor Countries scheme, which reduces debt and debt service payments while encouraging social expenditure. Another issue on which the Bank has recently been focusing has presented itself as an endangerment to a country's livelihood: support programs for HIV/AIDS. The WBG has also been focusing on reducing the risk of projects by means of better appraisal and supervision mechanisms as well as a multidimensional approach to overall development. (This includes not only lending but also support for legal reform, educational programs, environmental safety, anti-corruption measures and other types of social development.) The Bank encourages all of its clients, which number over 100, to implement policies that promote sustainable growth, health, education, social development programs focusing on governance and poverty reduction mechanisms, the environment, private business and macroeconomic reform. Opposition to the Bank While the WBG strives to create a poverty-free world, there are groups that are passionately opposed to the international patron. The opponents believe that, due to the fundamental structure of the Bank, the already existing imbalance between the world's rich and poor is only exacerbated. The system allows the largest shareholders to dominate the vote, resulting in WBG policies being decided by the rich but implemented by the poor. This can result in policies that are not in the best interests of the developing country in question, whose political, social and economic policies will often have to be molded around WBG resolutions. Moreover, even though the Bank provides training, assistance, information and other means that may lead to sustainable development, opponents have observed that developing countries often have to put health, education and other social programs on hold in order to pay back their loans. Opposition groups have protested by boycotting World Bank bonds. These are the bonds that the WBG sells on global capital markets to raise money for some of its activities. These opposition groups also call for an end to all practices that require a country to implement structural adjustment programs - including privatization and government austerity measures - an end to debt owed by the poorest of the poor, and an end to environmentally damaging projects such as mining or the building of dams. Conclusion It is not surprising that there is a clash of opinion over how aid is given. Indeed, those that offer assistance are going to want to have a say in how the loans are used and what kind of economic policies are fostered in a country's developmental process. Many developing and poor nations, however, are stuck in a quagmire of debt and impoverishment, no matter how much assistance they receive. Given this, we may need to remember that the process of aid is also a developing state, in which both the giver and the receiver should be helping each other reach a poverty-free world. Souerce: © 2011 Investopedia ULC. 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Selasa, 25 Oktober 2011

http://www.sovereignman.com

This currency is overvalued by Simon Black · View Comments 0diggsdigg Share submit to Stumble Upon Email This Burgers make better economic indicators than official statistics ever could. As I travel, I typically perform an informal price study of my own basket of consumer goods– a loaf of bread, a pack of cigarettes, a liter of petrol, and a handful of… non-family friendly wares. This is the type of information that is most valuable for me because, everything else equal, goods of similar quality should cost the same around the world. Unfortunately, Heisenberg was correct when he postulated that I am not capable of being in multiple places at exactly the same time… which is why I get excited whenever the Economist releases a new iteration of its Big Mac Index. The Big Mac Index compares worldwide prices, converted into dollars, of the McDonald’s signature sandwich. It is an excellent, though certainly not conclusive, indicator of whether a nation’s currency is undervalued or overvalued. The most recent release from July 16th confirms absolutely what I am seeing on the ground here in Europe: the Eurozone is seriously overvalued…by roughly 30% according to the index. In other words, the burger will set you back $4.62 based on the current euro/dollar exchange rate, 30% more than the $3.57 paid in the US. This would suggest, in theory, that the euro should fall from $1.42 to $1.08 in order to achieve parity with the dollar’s purchasing power. Admittedly, there are some flaws in the index. Europe is, and always has been, more expensive than the United States– taxes, regulation, and employer contributions are out of control… though I suspect the United States will catch up shortly. These obligations drive up natural price equilibrium and pollute purchasing power parity. My own experiences suggest that government influence adds 10% to prices in Europe, meaning that the euro’s range should be between $1.18 to $1.25. At its present valuation, the euro is terribly overpriced. More on this later. Right now I am in Budapest, one of my favorite cities in the world… Budapest has an amazing mix of culture, beauty, and elegance, with just a hint of sordidness so that it’s not too stuffy. Not to mention it’s every bit as nice as Paris at a significant discount. I was last here in December when the Hungarian forint was trading at 230 per US dollar. At the time, Budapest was the cheapest ‘nice’ city in the world… this was based on an artificially low, panic-induced exchange rate that I knew couldn’t last. It didn’t. Despite being on the brink of economic collapse, Hungary’s forint has gained to 195 per US dollar, an 18% increase; that, plus a small dose of inflation, has reduced Budapest’s price appeal for dollar consumers and investors. Prices are still reasonable, but certainly not ‘cheap’. In fact, I would say that in terms of cost of living competitiveness, the ship has sailed for the entire European Union, at least for now. There are certainly a few exceptions– parts of Poland, Bulgaria, and Lithuania to a degree. Fortunately, I expect this to change in the future. The entire continent is anchored on the euro, and that currency is dead man walking… for all of the problems in the United States absolutely pale in comparison to old Europe’s economic and fiscal woes. Italy, Greece, and Spain in particular are in such financial turmoil, their only solution is the oldie but goodie political tactic of inflating the currency by printing more of it. Barrack Obama is giving a clinic as we speak. In order for these countries to have full monetary flexibility, they would have to break apart from the Eurozone. The resulting loss of confidence would send the currency spiraling into a historical footnote. Even monetary disruptions in countries that have pegged their currencies, but not yet fully adopted the euro (… Latvia, for example) have the power to shake confidence in the unified currency. The likelihood of just one of these events occurring (Italy or Greece dropping the euro, Latvia devaluing, etc.) is effectively 100%– and this is low hanging fruit in my book. I have an idea to safely profit from the euro’s demise, but I would like to hear from you first, as always… especially if you have an alternative assessment on the euro’s future. In the meantime, I believe that Asia and Latin America currently present the best cost of living value, and I will be focusing on these regions in future missives. HAVE A PLAN. INTERNATIONALIZE. This month's Sovereign Man: Confidential is packed with even more information that you just can't find anywhere else. To learn more about SMC's RISK FREE trial, and to get immediate access to the archive, click here to learn how to get started. * Learn how to obtain residency AND citizenship in one of the safest countries in the world through an exclusive, SMC-only program. You won't find anyone else even talking about this country, let alone a low-cost citizenship opportunity. * Find out how to open a bank account in Hong Kong, no matter what your situation. Simon tells you how to do it without ever having to get on a plane. * Simon neg * Did you cash-in on Tim Staermose's winning investment recommendation from last month? Find out how you can still make money on this undervalued company with very limited risk. * Interested in storing gold overseas? Simon runs down a great offshore solution, along with specific contact details for getting set up. * Do you know what country will be the richest nation in the world per capita in the next 10-years? Find out... and learn how you can invest today. * You need to know about the Foreign Account Tax Compliance Act (FACTA). The new rules from this legislation affect US taxpayers and foreigners alike. Learn first hand in an exclusive interview with an international tax attorney. Copyright 2011 Sovereign Man. All Rights Reserved.
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Senin, 24 Oktober 2011

instaforex.com

Dunia Keuangan InstaForex InstaForex Company memberikan layanan trading mata uang secara lengkap di pasar Forex keuangan Internasional. Arah kerja perusahaan utamanya adalah: Memberikan layanan investasi yang berkualitas yang ditujukan untuk mendapatkan keuntungan spekulatif pada pasar trading keuangan internasional. Pelanggan InstaForex menggunakan teknologi online-trading terkemuka dan mendapatkan akses ke sumber-sumber berita dan informasi yang diberikan oleh agen-agen informasi terkemuka. Saat ini, ribuan pelanggan - baik yang baru maupun trader pasar uang profesional - menggunakan layanan InstaForex. Perusahaan InstaForex mengadakan undian berhadiah dua buah mobil sport: Lotus Elise dan Lotus Evora untuk semua klien InstaForex mulai dari 1 November 2009 hingga 25 Mei 2012. Dapatkan informasi lengkap mengenai kontes lainnya pada halaman kontes. Formula kesuksesan InstaForex anda terdiri dari: * Produk, yang disebut dengan MetaTrader 4, dari pengembang software platform trading terkemuka di dunia * News feed dari agen-agen informasi terkemuka, Reuters dan * Kemungkinan mendapatkan bantuan dari banyak counter agent yang memiliki akses langsung ke pasar Term trading InstaForex adalah alat manajemen sumber daya uang secara universal: * Ukuran rekening maupun volume transaksi tidak dibatasi * Ada lebih dari 300 simbol trading * Saham dan indeks FOREX * Transaksi dilakukan secara langsung dalam hitungan detik * Tersedia dukungan teknis dan konsultasi berkualitas selama 24/5 Pelajari lebih lanjut InstaForex berusaha untuk memberikan paket layanan secara luas, dan juga term trading yang terbaik di setiap arah kerja. Itulah mengapa para trader memilih kami. Silahkan evaluasi kualitas layanan kami dengan membuka rekening trading yang nyata. Jika ada masih baru di dunia trading, silahkan buka rekening demo untuk mengenal manfaat trading InstaForex. Akun trading-real MT5 $(this).corner("10px"); Instrumen Trading Instrumen terbaik untuk kesuksesan trading Forex online. Leading trading platform Trading Platform MetaTrader Market research Forex Analytics Forex Demo Account Forex Demo Account Calculator Trader's calculator Forex indicators Forex indicators Trading symbols Trading symbols Mengapa Memilih InstaForex Program Affiliasi Kondisi terbaik bagi partner dengan Menjadi Introducer! Menangkan Lotus dari InstaForex Undian berhadiah mobil sport Mendapatkan hasil dengan InstaForex Kondisi trading terbaik mulai dari 1.5 poin Berita-berita Forex dari seluruh penjuru dunia Hadiah Uang 500.000 USD Dealing center InstaForex memberikan akses untuk melakukan online-trading diseluruh dunia. Klien kami bisa mengelola dana investasi mereka tanpa perlu meninggalkan rumah atau kantor mereka. Selain bisa mendapatkan informasi peristiwa-peristiwa terbaru yang terjadi pada dunia keuangan mereka juga bisa membaca Ulasan Forex dan prediksi-prediksi, anda juga bisa mengikuti kursus trading. Untuk tujuan ini anda hanya perlu menerima free demonstrative version akun-trading kami. Proses edukasi yang diadakan oleh dealing center InstaForex, disederhanakan secara maksimal. Kita tidak mempunyai batasan dalam melakukan deposit atau transaksi. Broker-broker terkemuka didunia menjadi counter-parties InstaForex. Bekerjasama dengan broker-broker Western memungkinkan setiap klien mereka untuk bisa melakukan transaksi selama 24-jam. Oleh sebab itu, dengan membuka akun-trading di InstaForex, anda memiliki peluang untuk bisa masuk langsung kedalam pasar dan melakukan transaksi mata uang di Forex. Tidak ada perusahaan broker yang memberikan jaminan dalam mendapatkan uang. Bekerja pada bidang ini anda akan terlibat beberapa resiko dari kehilangan semua atau sebagian dana anda.pKami menawarkan akun-trading tanpa swap. Bisa menjadi salah satu pertimbangan bagi setiap trader yang berencana untuk bisa memperoleh keuntungan dari sebuah investasi. Pasar Forex adalah salah satu jenis investasi yang memiliki high-yield tetapi juga high-risk. Namun demikian, InstaForex menjamin sebuah keamanan untuk setiap aset keuangan dari setiap klien dan memberikan proteksi dari resiko non-trading terhadap dana kelolaan klien yang ada pada akun-trading mereka. Kondisi sarana akun trading-live terbaik dan 30% bonus Forex bisa membantu aktifitas setiap trader sehari-harinya. Kami tidak pernah menjanjikan profit ke anda, tetapi kami menyediakan kebutuhan trading yang anda perlukan, yang bisa memperbesar peluang anda untuk mendapatkan hasil transaksi yang lebih besar dibandingkan dengan pesaing kami. Kami menawarkan anda untuk bisa melakukan trading tanpa swap dan spread sesuai dengan preferensi trader. Kami juga menawarkan fix-spread dan leverage trading yang tinggi. Bagi klien yang mempunyai dana sebesar 100.000 USD, sebuah jaminan proteksi bisa digunakan, yakni akun trading-segregated. Cara kerja kami dipasar bertujuan agar klien kami bisa melakukan trading dengan sangat nyaman dan menguntungkan. Hingga saat ini, lebih dari 500.000 trader diseluruh dunia menggunakan InstaForex sebagai perusahaan broker mereka untuk melakukan trading pada pasar Forex dengan menggunakan platform MetaTrader. Hingga 1/Januari/2011, lebih dari 200 kantor perwakilan InstaForex Companies Group didirikan diseluruh penjuru dunia. Pencapaian yang tinggi dari perusahaan InstaForex ditandai dengan diberikannya penghargaan sebagai "The Best Broker in Asia" ditahun 2009 yang diberikan oleh salah satu majalah ekonomi internasional "World Finance". InstaForex adalah broker terkemuka dunia dibidang penyedia layanan broker pada pasar Forex. Sumber : InstaForex Companies Group © 2007-2011
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Minggu, 23 Oktober 2011

www.business.salford.ac.uk

Skip to the content University of Salford - a Greater Manchester University 1. Salford Business School Home 2. Courses 3. Postgraduate 4. MSc International Banking and Finance General Enquiries * +44(0)161-295-2222 * go-sbs@salford.ac.uk International Enquiries * +44 (0)161 295 4545 * international-enquiries @ salford.ac.Contact Us MSc International Banking and Finance Key benefits * Prepares you for the competitive international business environment * Focus your studies by choosing electives in line with your career plans * Develops the essential skills required for a career in the modern banking and finance industry Who is the programme for? This programme is suitable for students who wish to pursue a high-level career in the world of international banking and finance. Programme content Module Information... This programme will provide you with detailed knowledge of banking and finance operations and the critical skills for dealing with complex and unpredictable situations. This programme's modules are also listed and described in the Banking & Finance programme brochure. Download the brochure... Assessment You will experience a variety of teaching and learning assessment methods including lectures, seminars, tutorials, case studies, group and individual projects, examinations and reports. Career progression A wide range of career opportunities are possible, including finance director, investment banker, corporate relationship manager, private client relationship manager, regulatory compliance manager, equity analyst, structured instrument trader and project finance analyst. Further Information * Fees Funding opportunities Salford Business School occasionally offers a limited number of studentships please contact the admissions tutor for further details. For up-to-date details of funding opportunities please refer to http://www.pg.salford.ac.uk/funding. Applications You can now apply online for all Salford Business School full-time postgraduate programmes. Key Facts Duration * 12 months, full-time * Programmes start in September and January Contact Details Course Enquiries Service * +44 (0)161 295 4545 * course-enquiries@salford.ac.uk Entry Requirements * A first degree in a subject such as economics, finance, accounting or business studies or * A comparable qualification from a UK or overseas institution * Graduates with an aptitude to study banking and finance are also welcome * Professionals with work experience in the banking or finance sector, preferably with a professional qualification, would also be suitable for this programme, subject to approval through a process of Accreditation of Prior Learning (APL). See below for further information. * International students must provide evidence of proficiency in English - IELTS 6.5 band score or a score of TOEFL at 575 or above (computer-based 232) with a TWE of 4.0 or above are proof of this * If your current English language qualification is below this level, you may be able to take one of the many pre-sessional English courses in our School of Languages Salford Business School welcomes people of all ages to its courses, and is committed to extending opportunities to adults returning to study. These are some of our most well-equipped learners, bringing with them a number of skills and attributes gained from work, family and other life experiences. Applicants without the specified formal qualifications will be considered through the accreditation of prior learning (APL), which may be certificated or experiential. We advise you to contact Debbie Cartwright, School APL/APEL coordinator, to discuss your circumstances before submitting an application. Debbie Cartwright go-sbs@salford.ac.uk 0161-295-5923 Placement Years Students who take the option of a professional placement year generally enjoy much better employment prospects! Students on all full-time Master courses - with the exception of The Salford MBA - can choose the option of a placement year in place of the dissertation normally undertaken in Semester 3. This includes International Students, who can normally extend their visa to cover the additional year of the programme. The fee for the Professional Placement Year taken as an option on a Master course is £1,600. More information about placements... Page maintained by m.l.sanders@salford.ac.uk * Help / Accessibility * Freedom of information * Privacy policy
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http://www.weseed.com

The uses of money What we'll learn: 1) What are the uses of money? 2) Why invest? 3) Don't forget about giving it, too. Everyone loves money — you can use it to buy all kinds of stuff, like burgers, iPods, and plane tickets to Costa Rica. And Americans are definitely good at spending money. But there's more that you can do with money than just spend it. You can save it, invest it, or — and let's not forget this — donate it to charity. Since you probably get the gist of spending it, we'll dive right into saving it. You've heard this since you were wobbling around the floor in diapers: save, save, save. Your parents were right... sort of. Everyone should have a rainy-day fund for when the car needs a new engine or when the cat needs her gallbladder removed. But what do you do with non-emergency money? Put it in your savings account? Perhaps a Certificate of Deposit (CD)? Well, that's way better than burying it in your backyard, but it's still not great. Why? Because your money is being lazy. Your money might be earning a little interest (one or two percent) if you put it in a savings account or CD, but it will barely keep pace with inflation, which is about three percent. That means your money is losing value every year. If you had $1,000 today, you would need to have $1,030 next year to buy the same amount of stuff. So how can your money keep up? Make it earn more for you. Enter the stock market. Investing your money gives it the opportunity to make more than one or two percent. (It also gives you the opportunity to lose more than one or two percent, but hopefully by the end of WeSeed's Learn levels, that won't be the case.) On average, the market pays out about eight percent. That's quadrupling what you would have earned by investing your money in a bank! And then let's remember that there's always charity. There's a saying we like to throw out every now and then: Make as much as you can, save as much as you can, donate as much as you can, and spend as much as you need. In all of this talk about making money, we should remember to give some back, too. Three Facts to Wow Your Friends at a Party 1) Warren Buffett made his first stock purchase when he was 11 years old. 2) In the 18th century, people would store their money in "pygg" (clay) pots or jars, which became known as "piggy banks." 3) The saying "Save your money for a rainy day" comes from an Italian comedy, The Bugbears, written in 1561. Read Case Study. Source : © 2011 We Seed. All Rights Reserved.
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Minggu, 16 Oktober 2011

http://www.cmsfx.com

Central Banks Set Interest Rates Since central banks, also known as reserve banks, play the crucial role of setting interest rates they need to be followed and studied by a fundamental (and even technical) Forex trader. Central banks want to achieve financial stability of their currency (i.e. battle inflation) and maintain overall economic growth in their country. Their primary responsibility is to oversee the monetary policy of a particular country or group of countries (in the case of the European Union). Monetary policy refers to the various efforts made to effectively control and manage the amount of money circulating within a nation. Skilled investors are able to properly identify which currency will experience an increase in interest rates based upon a central bank’s statements and incoming financial data. Those investors that are correct in their speculations can predict how the respective currencies should move, and as a result should be able to take the proper long or short positions. Central Bank’s Role in Fighting Inflation Central banks act in ways to lessen the effects of inflation on an economy. Inflation refers to a rise in price levels which causes a fall in the purchasing power of a currency. Inflation accounts for an entire basket of goods and services, not just an increase in the price of one item. Monitoring prices of a particular basket is known as indexing and provides a reliable method of tracking inflationary movement. Inflation’s effects can be felt on just about everyone within a society regardless of whether one engages in trading or not. At times of high inflation, employees will demand more money for their work as the previous hourly wage no longer reflects the same value. In order to pay their employees more, businesses have to raise their prices so that they can also manage to raise the wages of its employees. www.cmsfx.com Inflation and Oil (Example) Inflation Interestingly, inflation can be set off by the increase in price of just one crucial item (food or energy) as well. An example of a volatile commodity that can cause inflation is oil. An increase in the price of oil would cause many other items that use it as an input in the production process (such as gasoline) to also increase in price and therefore begin the inflationary process. Inflation poses a problem to the population because it erodes people’s wealth and standard of living as their bank accounts and wages seem to diminish while prices get higher. The purchasing power of the currency decreases and the currency loses strength. Therefore inflation’s erosive nature necessitates the actions taken by the central bank. Affects of Inflation on Interest Rates and Investment If inflation is a concern then the central bank will raise interest rates to appease the inflationary pressure. Higher interest rates will cause inflation to slow because it will cost more for companies and consumers to borrow from banks to fund either investment spending or consumption (i.e. for consumers it will be harder to refinance a mortgage on a house to free up spending money). With more restrictive access to money, economic activity slows down and so do inflationary pressures. The higher interest rate will cause the currency to appreciate in the eyes of investors, both domestic and foreign, as they will benefit from a higher yield on the country's assets. If the currency is now appreciating relative to other currencies, then Forex traders will buy into it in order to trade with the trend, sending even more money towards that economy. It is therefore a delicate balance that central banks have to strike. They would like higher interest rates to strengthen the currency and promote foreign investment, but they must be aware that higher interest rates hurt domestic businesses and consumers that rely on borrowing money from banks. In the following pages, we shall look at an example of interest rates and central banks, and their impact on the Forex market at work. * Home * >Forex Education * >Online Forex Course Table of Contents Close Forex Basics Lessons Lesson 1. Introduction to the Foreign Exchange * What is Forex? * Operation * Aspects of Trading Lesson 2. How Trading Works and Terminology * How Forex Trading Works * Explanation of Margin and Leveraged Trading * Risk Management Lesson 3. A Sample Trade * Setting Up An Example * Opening two Positions * Initial Changes, 4 Hours Later * The Next Day, 24 Hours Later * Candles Can Paint A Story of Wild Activity - 26 Hours Later * Retraction from a Big Move - 30 Hours Later * Two Days Later - 48 Hours Later Analysis and Trading Lessons Lesson 4. Exchange Rates and Supply and Demand * Calculations of Exchange Rates * Supply and Demand * Actors that Affect Supply and Demand * Central Banks Lesson 5. Central Banks and Interest Rates * The Role of Central Banks * Market Reactions to Central Banks – FOMC Example * FOMC Example Continued * Central Banks You Need to Know Lesson 6. Fundamental Analysis * What are Fundamental Factors? * Reaction of the Forex Market to a Fundamental Release * Macroeconomic Indicators * Inflation and Inflation Indicators * Employment Indicators Lesson 7. Technical Analysis * Chart Types * Trends * Concept of Support and Resistance * Trend Reversal Patterns * More Reversal Patterns - Various Tops and Bottoms * Continuation Patterns * More Continuation Patterns Lesson 8. Risk Management – Creating A Trading Methodology * Structuring a Plan for Trading * Risk Management Techniques * Using Exposure Per Trade in Examples * Psychology of Trading * A Trader’s Journal Progress Meter 0 out of 8 Lessons Completed! Lesson 5: Central Banks and Exchange Rates 5.3 Market Reactions to Central Banks - FOMC Example www.cmsfx.comWe will attempt to show how important interest rates are to currency movements by examining price action on the Forex market during a recent central bank tightening campaign. The following example focuses on the EUR/USD pair. Let’s investigate the implication of the United States Federal Reserve’s interest rate decisions to the value of the US Dollar. Dollar Gaining www.cmsfx.com EUR/USD - December 2004 - December 2006: The Euro started 2005 at a high exchange rate, 1.3500 Dollars per Euro. US interest rates had been hovering at very low rate of 1% prior to this time and the Euro was appreciating. In 2005, on the other hand, there was steady Euro depreciation. The US central bank, the Federal Reserve, continued a campaign, started in July 2005 to gradually raise interest rates from 1%. At every subsequent meeting of the Federal Open Market Committee (FOMC), federal officials increased the base interest rate by .25%. Financial markets reacted to this gradual hiking campaign by favoring and strength ending the Dollar. When 2006 started, the EUR/USD pair traded around 1.2000, a change of 13 cents or 1300 pips. The central bank's actions were a major cause for the Dollar appreciating in 2005. Trend Reverses www.cmsfx.com EUR/USD - March 2005 - April 2006: In December ‘05, at the 1.2000 level, the Euro finds support and begins to gain (second rectangle). At this time investors are speculating that the Fed tightening campaign is likely coming to an end. Similar speculation, and Euro appreciation, happened between July and August ‘05 (first rectangle). In February the Fed’s base rate was raised to 4.50%. Speculation that the Federal Reserve would finally pause after 15 straight rate hikes continued throughout March and the first half of April, creating an upward trend favoring the Euro. * Home * >Forex Education * >Online Forex Course Table of Contents Close Forex Basics Lessons Lesson 1. Introduction to the Foreign Exchange * What is Forex? * Operation * Aspects of Trading Lesson 2. How Trading Works and Terminology * How Forex Trading Works * Explanation of Margin and Leveraged Trading * Risk Management Lesson 3. A Sample Trade * Setting Up An Example * Opening two Positions * Initial Changes, 4 Hours Later * The Next Day, 24 Hours Later * Candles Can Paint A Story of Wild Activity - 26 Hours Later * Retraction from a Big Move - 30 Hours Later * Two Days Later - 48 Hours Later Analysis and Trading Lessons Lesson 4. Exchange Rates and Supply and Demand * Calculations of Exchange Rates * Supply and Demand * Actors that Affect Supply and Demand * Central Banks Lesson 5. Central Banks and Interest Rates * The Role of Central Banks * Market Reactions to Central Banks – FOMC Example * FOMC Example Continued * Central Banks You Need to Know Lesson 6. Fundamental Analysis * What are Fundamental Factors? * Reaction of the Forex Market to a Fundamental Release * Macroeconomic Indicators * Inflation and Inflation Indicators * Employment Indicators Lesson 7. Technical Analysis * Chart Types * Trends * Concept of Support and Resistance * Trend Reversal Patterns * More Reversal Patterns - Various Tops and Bottoms * Continuation Patterns * More Continuation Patterns Lesson 8. Risk Management – Creating A Trading Methodology * Structuring a Plan for Trading * Risk Management Techniques * Using Exposure Per Trade in Examples * Psychology of Trading * A Trader’s Journal Progress Meter 0 out of 8 Lessons Completed! Lesson 5: Central Banks and Exchange Rates 5.4 FOMC Example Continued Let's continue examining how the market reacts to changes in the US interest rate outlook. We turn to 2006. Euro Uptrend Continues 1. On March 28th the Federal Open Market Committee (FOMC) continued their campaign to hike rates by increasing the base rate for the 15th consecutive time by .25% to 4.75%. Even though the FOMC raised rates, which would favor the currency, the Euro continued climbing against the Dollar. Investors and traders kept up the speculation that the Federal Reserve was ready to end their campaign. The only question was how much further further they would go. www.cmsfx.com EUR/USD - December 2005 - May 2006 2. On April 14th, Greg Ip, a prominent Wall Street Journal reporter that follows the Federal Reserve closely, wrote that its officials were divided regarding the need for further tightening, fueling investors’ expectations that the base rate would stop at 5%. This news along with other Dollar negative factors (a standoff with Iran over their nuclear ambitions) accelerated Dollar losses for the next four weeks. www.cmsfx.comThe EUR/USD pair went from trading at 1.2100 to 1.2900 which is a significant 800 pip move that translates to a change of $8,000 dollars for a 1 Lot position. Whether the position gained or lost the 800 pips depends on whether the open position was a buy or sell of the pair. 3. On May 10th, the FOMC met and raised the rate to 5%. In the announcement that accompanied the rate hike the Federal Reserve officials said that “further tightening would depend on incoming economic data”. This statement clouded the intentions of the FOMC for their next meeting, which was scheduled for June 29th. A couple of days later when the pair closed in on 1.3000, it stopped trending and entered a ranging market as investors analyzed what the Federal Reserve would do next. www.cmsfx.com Federal Reserve Chairman Moves Markets with Hawkish Talk on Interest Rates The start of June brought some clarification to investors and traders. The still new Federal Reserve chairman Ben Bernanke, at a speech, said that “recent inflation measures were higher than his comfort zone”. These comments were regarded as highly “hawkish” a term to mean an official that favors higher interest rates. “Dovish” statements are those that favor cutting rates. Bernanke's comments caused the Dollar to immediately strengthen as it seemed that the base rate would not stop at 5%, contradicting the earlier speculation that had built up following the Wall Street Journal news report and analysts predictions. www.cmsfx.comIn the next 7 trading sessions, the EUR/USD moved from 1.2950 down to 1.2550 a change of 400 pips (or $4,000 for a 1 Lot position). We have already explained what role inflation plays in the considerations of central bank officials. The Dollar strengthened on the changing US interest rate outlook, touching the older upper (green) trendline we had drawn previously in March/April. From this point, the pair enters another, larger ranging market with price bouncing between 1.2900 and 1.2500. The ranging market developed because investors and traders were unsure about what would happen next since higher inflation readings meant that the FOMC could continue raising rates. If inflation did not pose a problem then the FOMC could pause in their rate hiking campaign. Now that we have taken you through an example of how central banks impact the Forex market let’s take a closer look at the main central banks. 5.5 - 8 Central Banks You Need to Know The world’s central banks possess similar forms of operation and structure although their long term goals may vary. There are eight major central banks within the world economy today: 1. US Federal Reserve Bank (USD) 2. European Central Bank (EUR) 3. Bank of England (GBP) 4. Bank of Japan (JPY) 5. Swiss National Bank (CHF) 6. Bank of Canada (CAD) 7. Reserve Bank of Australia (AUD) 8. Reserve Bank of New Zealand (NZD) www.cmsfx.com Federal Reserve Bank- United States The Federal Reserve The most influential bank is the US Federal Reserve Bank because the US dollar is the most heavily traded currency. The Federal Reserve’s Federal Open Markets Committee (FOMC) decides on interest rates and is made up of 7 governors of the Reserve Board and 5 of the 12 district reserve presidents. The Federal Reserve meets 8 times a year and its key official is Ben Bernanke, the chairman of the Federal Reserve. Twelve regional Federal Reserve Banks were created so that the economic operations of the United States can be monitored efficiently. The FOMC committee meets about every six weeks. The FOMC is comprised of members from the Federal Reserve Board that are both appointed and approved through joint efforts of the President, Congress and regional Federal Reserve Bank presidents. The decisions made by the FOMC are closely watched by investors both within and outside of the US because it gives traders an idea of the economic sentiment, which can be used to predict possible interest rate movements. www.cmsfx.com The European Central Bank European Central Bank The European Central Bank was established after the creation of the Euro in 1998. It oversees the actions of the other member European central banks such as the Banque de France or Ufficio Italiano dei Cambi. The European Central Bank has a group similar to the Federal Open Markets Committee that helps decide on the changes that may need to be made to monetary policy. The committee is known as the Governing Council and is comprised of 6 members of the executive board of the European Central Bank in addition to all the governors of the national central banks from the countries which use the Euro. The Governing Council meets twice a week but only changes policy at 11 of these meetings. The key official associated with the Governing Council is Jean-Claude Trichet, who is the President of European Central Bank. www.cmsfx.com The Bank of England Bank of EnglandThe Bank of England consists of a committee known as the Monetary Policy Committee. It is comprised of 9 members, which include a governor, 2 deputy governors, 2 executive directors and 4 outside experts. The main official associated with the Bank of England is a man by the name of Mervyn King who is the governor of the Bank of England. The Monetary Policy Committee meets once every month in order to discuss any policy changes. www.cmsfx.com The Bank of Japan Bank of Japan The Bank of Japan also has a committee that consists of the Bank of Japan governor, two deputy governors along with 6 other members. It meets once or twice a month and the key official associated with the Bank of Japan is Toshihiko Fukui who is the governor of the Bank of Japan. www.cmsfx.com The Swiss National Bank Swiss BankThe Swiss National Bank has a very small committee that consists of just 3 people and is typically more conservative as far as interest rate movements are concerned. The committee meets quarterly and the key official associated with the Swiss Bank is Jean-Pierre Roth who is the Chairman of the Swiss National Bank. The Royal Bank of Canada The Bank of Canada also has a committee which is known as the governing council. The governing council consists of the governor of the Bank of Canada, the senior deputy governor and four deputy governors. The committee meets about 8 times a year and the key official associated with the bank is David Dodge, who is the governor of the Bank of Canada. The Reserve Bank of Australia The Reserve Bank of Australia consists of a monetary policy committee which contains a central bank governor, deputy governor, the secretary to the treasurer and 6 independent members appointed by the government. The committee meets about eleven times a year and the key official for the Reserve Bank is Ian Macfarlane, who is the Governor of the Reserve Bank of Australia. The National Bank of New Zealand Finally, the National Bank of New Zealand unlike all the other banks has no committee. In fact, all the power of monetary policy lies in the hands of one individual: the central bank governor. The decision is made about 8 times a year by Alan Bollard who is the governor. 6.1 What are Fundamental Factors? www.cmsfx.comIn the currency market, there exist two basic types of analysis: fundamental analysis and technical analysis. Technical analysis will be discussed in the next lesson. Fundamental analysis gauges the intrinsic value of a country's economy, and judging on its expected future performance, positions are opened to take advantage of the anticipated trends in the currency market. Fundamental Factors News that has an impact on the economy both directly and indirectly is considered a fundamental factor. These fundamentals are separated into three major categories: economic factors, financial factors, and political factors which include crises. Economic and financial factors have the biggest impact on currencies movements. The reason that economic and financial data releases are watched is the uncertainty concerning the release's outcome or results. The fundamental reports are kept under strict secrecy up to the time of the actual occurrence. Central banks, for example, change the discount rate confidentially and even though the markets closely watch these events, sometimes the outcomes do not coincide with the predictions. The deciding factor in whether a fundamental release will have an effect on the currency market is how closely the actual results come to economists' predictions. If the fundamental release matches predictions then it should have already been "priced in" to the market beforehand. However, if the release strays from the anticipated numbers, then it will have a bigger impact on the market. The dates and times of economic data release are well known and are anticipated by the market. There are many resources available on the Internet concerning financial, and economic indicators. CMS provides an Economic Calendar for the dates of critical fundamental announcements and events. Political factors can include elections, high level talks, and crises. Some political factors, such as a presidential election or a G-7 meeting are scheduled beforehand and can be anticipated. A political crisis such as a nuclear test by a rouge nation such as N. Korea, or a terrorist attack such as 9/11 can have dramatic effects on the currency markets and are almost impossible to predict. However, only big political events that can affect the patterns of trade or working of an economy or group of economies will have an effect on the financial markets. Next we will look at an example of a fundamental release and a political crisis. * Home * >Forex Education * >Online Forex Course Table of Contents Close Forex Basics Lessons Lesson 1. Introduction to the Foreign Exchange * What is Forex? * Operation * Aspects of Trading Lesson 2. How Trading Works and Terminology * How Forex Trading Works * Explanation of Margin and Leveraged Trading * Risk Management Lesson 3. A Sample Trade * Setting Up An Example * Opening two Positions * Initial Changes, 4 Hours Later * The Next Day, 24 Hours Later * Candles Can Paint A Story of Wild Activity - 26 Hours Later * Retraction from a Big Move - 30 Hours Later * Two Days Later - 48 Hours Later Analysis and Trading Lessons Lesson 4. Exchange Rates and Supply and Demand * Calculations of Exchange Rates * Supply and Demand * Actors that Affect Supply and Demand * Central Banks Lesson 5. Central Banks and Interest Rates * The Role of Central Banks * Market Reactions to Central Banks – FOMC Example * FOMC Example Continued * Central Banks You Need to Know Lesson 6. Fundamental Analysis * What are Fundamental Factors? * Reaction of the Forex Market to a Fundamental Release * Macroeconomic Indicators * Inflation and Inflation Indicators * Employment Indicators Lesson 7. Technical Analysis * Chart Types * Trends * Concept of Support and Resistance * Trend Reversal Patterns * More Reversal Patterns - Various Tops and Bottoms * Continuation Patterns * More Continuation Patterns Lesson 8. Risk Management – Creating A Trading Methodology * Structuring a Plan for Trading * Risk Management Techniques * Using Exposure Per Trade in Examples * Psychology of Trading * A Trader’s Journal Progress Meter 1 out of 8 Lessons Completed! Lesson 6: Fundamental Analysis 6.2 Reaction of the Forex Market to a Fundamental Release Lets take one through an example of how to use a fundamental data release to trade Forex. Then we will show an example of a political crisis. Release of a Fundamental Indicator (Non-Farm Employment Change) On November 3rd, 2006, the United States Department of Labor released a monthly report called the Non Farm Payroll. This fundamental indicator (the term for a report or release) measures the change in employment in the United States for the previous month, excluding the farming sector. www.cmsfx.com For this release the figures came in above expectations of economists. As a result the Dollar strengthened that day as the data suggested that the labor sector of the US economy was doing better than expected. As you can see, on November 3rd, there was a huge surge as price moved downward from around 1.2770 to 1.2680, a move of 90 points, or "pips" in forex lingo. There aren't any other candles in the surrounding time period where price moves as much as the 30 minutes after the release of the Non Farm Employment data. A Political Crisis www.cmsfx.com Nukes This chart shows the reaction of the currency market to a geopolitical crisis. In this crisis, North Korea detonated a nuclear weapon in a test of their nuclear capabilities. How a particular currency will respond to geopolitical dangers depends on many factors. Here, the Japanese Yen suffers because it is a neighbor of North Korea and because the two countries have tense relations they are opposed to each other militarily. Obviously, any attack by North Korea on Japan would damage the Japanese economy. When traders got wind of these developments on Friday, October 6th, they sold the Yen and bought the Dollar. The price changed around 100 pips, meaning the amount of Yen you needed to get one Dollar went up from 117.90 to 118.90. Or, in other words it now cost one more Yen to buy a US Dollar. Safe Haven www.cmsfx.comSince a nuclear test by North Korea is very Yen negative, the Dollar would do better since it's the opposite currency in this particular pair. The Yen's weakness withstanding, the Dollar would have still gained on this geopolitical event because it is considered a "safe haven" currency. During times of danger, investors will move their money out of riskier investments and put them into more stable ones. Since the US is the sole superpower left in the world, it naturally attracts those investors that want to park their money in a safer economy. www.cmsfx.comThe US's "safe haven" status doesn't always work in times of danger in the world. If there is a geopolitical event that directly affects the United States, such as a terrorist attack, or something less immediate, such as military posturing against a state like Iran investors might sell the Dollar. Traders would be worried that the threats might come to action and there would be a war between the two countries. A war with Iran weakens the Dollar because the US economy is so tied to the oil market, of which a large proportion travels through the Persian Gulf. A military engagement against Iran would disrupt oil deliveries and cause hardship for the American economy in other ways. So, as we mentioned before, there are many factors to consider during a political crisis to see what effect it will have on a particular currency. © 2011 Capital Market Services, LLC. All rights reserved. Privacy Policy and Risk Disclosure
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