Fundamental factors affecting the FOREX market
Federal Reserve Bank (Fed) (Federal Reserve): The Central Bank of the United States regulates three mechanisms of monetary policy: open market operations (open market operations), the discount rate (the discount rate) and the reserve requirement (reserve requirements). Board of Governors of the Federal Reserve System is responsible for interest rates and reserve requirements. Federal Open Market Committee is responsible for open market operations. Using these three tools, the Fed influences the amount of funds that depository institutions hold at Federal Reserve Bank and, thus, changing the interest rate on short-term loans (the federal funds rate).
Federal Open Market Committee (FOMC) Federal Open Market Committee: FOMC is responsible for making decisions on monetary policy, including changes in interest rates, which is 8 times a year. At these meetings, the Committee considers the economic and financial conditions, determines monetary policy and assesses the long-term goals of price stability and economic growth. A committee of 12 members composed of 7 members of the Governing Council President Federal Reserve Bank of New York, while the remaining four places are occupied by a one-year term at a time each of the presidents of 11 other Reserve Banks. One place to claim the presidents of banks in Boston, Philadelphia and Richmond, on the other - Cleveland and Chicago, the third - Atlanta, St.. Louis and Dallas, the last goes to the president of Bank of Minneapolis, Kansas City or San Francisco. Non-voting Reserve Bank presidents attend committee meetings, participate in discussions and contribute to policy development committee. At a meeting held on November 1, Committee decided to raise interest rates on short-term loans at 25 basis points to 4%. During the year the FOMC raised rates by a quarter percent at each meeting. The last meeting of this year will be held on December 13. In 2006, the scheduled meeting: January 31, March 28, May 10, June 28-30, August 8, September 20, October 24, December 12.
Council members with voting rights in 2005:
Alan Greenspan, the Federal Reserve board member, chairman;
Timothy F. Geithner, New York, vice-chairman;
Susan Schmidt Bies, Member of the Board of Governors Federal Reserve;
Roger W. Ferguson, Jr., Member of the Board of Governors Federal Reserve;
Richard W. Fisher, Dallas;
Donald L. Kohn, member of the Board of Governors Federal Reserve;
Michael H. Moskow, Chicago;
Mark W. Olson, a member of the Board of Governors of the Federal Reserve;
Anthony M. Santomero, Philadelphia;
Gary H. Stern, Minneapolis.
Alternate members:
Jack Guynn, Atlanta;
Jeffrey M. Lacker, Richmond;
Sandra Pianalto, Cleveland;
Janet L. Yellen, San Francisco;
Christine M. Cumming, First Vice-President, New York.
Fed Funds Rate (Interest rate): Funds rate FED, it is obvious that most accurately reflects the direction of rate changes. This is the rate that depository institutions pay each other for overnight loan. FED announces a change funds rate when it wants to give clear signals of monetary policy. These ads typically have a large impact on all stocks, bonds and currency markets.
Discount Rate (Discount Rate) interest rate the FED charges commercial banks. Although this is more of a symbolic value, it changes also imply clear signals of a policy. Discount rate - almost always less than the rate of funds.
Treasury (Treasury). The U.S. Treasury is responsible for servicing the government debt and the decision to finance the budget. The Treasury is not talking about monetary policy, but his statements on the dollar have a strong influence on the currency. Occupy key positions:
John Snow, Treasury secretary, was appointed by President George W. Bush 3 Feb. 2003;
Robert M. Kimmitt, Assistant Secretary, has served since August 16, 2005;
30-year Treasury Bond (30-year Treasuries): 30-year bonds, also known as long bonds. They are compared with other bonds had more reliable, as provided by the American pravitelstvom.Eto most important indicator of inflation expectations in the markets. Interest rates on 30-year bonds is higher than on a Short-securities to offset the risk associated with increasing duration of the period. Markets likely to use quantity (the price), when it comes to levels of debt securities. As with all obligations of the 30-year treasury bonds is inversely proportional to price. There is no clear correlation between long-Bond and the U.S. dollar. But usually kept following relationship - falling value of the bond (increase amount) due to inflationary concerns may pressure the dollar. The rise may also be the result of strong economic data. Depending on the stage of economic cycle, strong economic data may have different effects on the dollar. If there is no threat of inflation - the strong economic data may raise a dollar. But from time to time, when the threat of inflation (higher interest rates), strong data normally hurt the dollar, due to the sale of bonds. Financial or political turmoil in the markets of third world countries is a hot interest in U.S. Treasuries due to their safe nature, thus helping the dollar.
10-year Treasury Note (10-year treasury notes): FX markets are usually checked with a 10-year-old tickets by comparing them with similar number abroad, namely, for the Euro (German 10 - year bund), yen (10-year JGB ) and the pound (10-year gilt). The presence of a spread (the difference in numbers) between the number of 10-year U.S. Treasury notes and U.S. commitments, affect the exchange rate. More U.S. treasury bills is generally beneficial to the U.S. dollar against foreign currencies.
3-month Eurodollar Deposits (3-month Eurodollar deposits): The interest rate on 3-month dollar deposits in banks outside the U.S.. It serves as a valuable benchmark for determining interest rate differentials to help estimate exchange rates. For example, let's take USD / JPY, a large interest rate differential in favor of the eurodollar against the euro - probably, USD / JPY will rise. Sometimes, because of the influence of other factors, this relationship is not supported.
The most important economic data coming out in the U.S.:
labor reports include two surveys: survey of 60,000 households, resulting in determining the level of unemployment, and research data in the Payroll nonfarm 375,000 businesses and government agencies, it is determined by the number of new jobs created in non-agricultural sector The average workweek and average hourly earnings.
GDP (gross domestic product) (GNP) is the final indicator of the economy should be seen primarily indicators that affect it and are its components (industrial production (Industrial Production), personal income and spending (Personal Income & Spending), costs construction (Construction Spending), etc.). Report on the GDP data are published Bureau of Statistics U.S. Department of Commerce (The Census Bureau of the Department of Commerce) each quarter. Statistics for the previous quarter is published on the third or fourth week of the month at 8:30 EST (New York), followed by revision. These come in the following sequence: preliminary (GDP advance) - revised (GDP provisional (revised)) - Final (GDP final).
CPI (comsumer price index) (consumer price index) determines the change in the level of retail prices for goods and services included in the consumer fixed "basket". As part of "basket" of goods represented 44.1% and 55.9% - services. It is the main measure of inflation in the country. Consumer Price Index is analyzed together with the producer price index (PPI). If the economy develops in normal conditions, the growth rates CPI and PPI can lead to an increase in basic interest rates in the country. This, in turn, leads to an increase in the dollar, as it increases the attractiveness of investing in currencies with higher interest rate. The indicator is influenced by such factors as the volume of money supply (aggregate M2) and producer prices and import prices (which are counted in calculating the index.) indicator published by the Bureau of Accounting Employment U.S. Department of Labor (The Bureau of Labor Statistics of the Department of Labor) in the middle of each month (Tuesday or Thursday) will soon after the PPI index to 08:30 EST (New York).
PPI (Producer Price Index) (PPI) measures how much the producers receive for their products wholesale. The index includes the prices of three types of goods: raw materials, intermediates and final goods. Is another way to determine the rate of inflation in the country (other than CPI). Published in the second full week of each month and reflects data from the previous month.
Nonfarm payrolls determines the number of new jobs created in neselskohozyaysvennyh sectors for the month. The data are adjusted to account for seasonal fluctuations and changes in base rates. Published by the Bureau of Accounting Employment U.S. Department of Labor (The Bureau of Labor Statistics of the Department of Labor) on the first Friday of each month at 8:30 EST (New York).
PPI (Producer Index) (PPI) reflects the dynamics of change in prices to sell their products domestic producers at the wholesale level implementation. The report is based on a monthly comparison of prices for 3500 types of products, factors which are calculated in proportion to their contribution to GDP. PPI was normalized to 100 at the end of 1982. The report is published by the Bureau of Accounting Department of Labor Employment, usually around the 11th of each month at 08:30 EST (New York).
NAPM index - a measure of the health of the productive sector, or more broadly across the economy, calculated on the basis of observations of the purchasing managers and analysis of data on new orders, production, employment, deliveries and inventory, which is considered in order of decreasing importance. The index is based on a survey of more than 250 companies within twenty-one industry, covering all 50 states. These go on the first business day of the month at 10:00 EST (New York) and reflects the data of the previous month. The value of more than 50% indicates that manufacturing is growing, while a reading below 50% means a fall. NAPM index is thought to be an early indicator of inflationary pressure.
CCI (Consumer Confidence Index) (index of consumer sentiment) reflects consumers' willingness to spend their incomes. The index is calculated from observations of 5000 households, non-representative sample of the population. High consumer power can mitigate the economic slowdown and to enhance its recovery. Published every last Tuesday of each month at 10:30 EST (New York).
Productivity report (a report on labor productivity) indicates how many products produced by one worker. Many economists believe that productivity growth enables an economy to grow, while not causing the inflation rate as opposed to wage increases. The report is published seven numbers (or the nearest working day) in January, April, July and October, 8:30 EST (New York).
ECI (Employment Cost Index) (index of labor costs) is used to track inflation. Determines the change in the cost of wages, profits and bonuses for certain groups of employees. The reason this indicator is used to determine the level of inflation is simple: an increase in wages will soon lead to higher prices (ie inflation). In conjunction with a report on labor productivity ECI can show whether a reasonable increase in wages. The report is published on the last working day of January, April, July and October at 8:30 EST (New York).
Beige Book (beige book) - known informally as the Fed report (official name - "Summary of comments on the current economic situation in the Federal Reserve Districts"). Is a digest of reports 12 reserve banks in the U.S. that characterize the sphere of industrial production, services, agriculture, financial institutions, labor market, real estate market. Is an indicator of future actions FOMC. Published 8 times a year on Wednesday, two weeks before the meeting of the Federal Open Market Committee. The latest report was published on November 30 14:15 EST (New York).
Cross Rate Effect
Price of the dollar against the single currency are sometimes pushed another currency pair (exchange rate), which may not include the dollar. For example, a sharp rise in the yen against the euro (falling EUR / JPY) may lead to an overall reduction of the euro, including a drop in EUR / USD.
Federal Reserve Bank (Fed) (Federal Reserve): The Central Bank of the United States regulates three mechanisms of monetary policy: open market operations (open market operations), the discount rate (the discount rate) and the reserve requirement (reserve requirements). Board of Governors of the Federal Reserve System is responsible for interest rates and reserve requirements. Federal Open Market Committee is responsible for open market operations. Using these three tools, the Fed influences the amount of funds that depository institutions hold at Federal Reserve Bank and, thus, changing the interest rate on short-term loans (the federal funds rate).
Federal Open Market Committee (FOMC) Federal Open Market Committee: FOMC is responsible for making decisions on monetary policy, including changes in interest rates, which is 8 times a year. At these meetings, the Committee considers the economic and financial conditions, determines monetary policy and assesses the long-term goals of price stability and economic growth. A committee of 12 members composed of 7 members of the Governing Council President Federal Reserve Bank of New York, while the remaining four places are occupied by a one-year term at a time each of the presidents of 11 other Reserve Banks. One place to claim the presidents of banks in Boston, Philadelphia and Richmond, on the other - Cleveland and Chicago, the third - Atlanta, St.. Louis and Dallas, the last goes to the president of Bank of Minneapolis, Kansas City or San Francisco. Non-voting Reserve Bank presidents attend committee meetings, participate in discussions and contribute to policy development committee. At a meeting held on November 1, Committee decided to raise interest rates on short-term loans at 25 basis points to 4%. During the year the FOMC raised rates by a quarter percent at each meeting. The last meeting of this year will be held on December 13. In 2006, the scheduled meeting: January 31, March 28, May 10, June 28-30, August 8, September 20, October 24, December 12.
Council members with voting rights in 2005:
Alan Greenspan, the Federal Reserve board member, chairman;
Timothy F. Geithner, New York, vice-chairman;
Susan Schmidt Bies, Member of the Board of Governors Federal Reserve;
Roger W. Ferguson, Jr., Member of the Board of Governors Federal Reserve;
Richard W. Fisher, Dallas;
Donald L. Kohn, member of the Board of Governors Federal Reserve;
Michael H. Moskow, Chicago;
Mark W. Olson, a member of the Board of Governors of the Federal Reserve;
Anthony M. Santomero, Philadelphia;
Gary H. Stern, Minneapolis.
Alternate members:
Jack Guynn, Atlanta;
Jeffrey M. Lacker, Richmond;
Sandra Pianalto, Cleveland;
Janet L. Yellen, San Francisco;
Christine M. Cumming, First Vice-President, New York.
Fed Funds Rate (Interest rate): Funds rate FED, it is obvious that most accurately reflects the direction of rate changes. This is the rate that depository institutions pay each other for overnight loan. FED announces a change funds rate when it wants to give clear signals of monetary policy. These ads typically have a large impact on all stocks, bonds and currency markets.
Discount Rate (Discount Rate) interest rate the FED charges commercial banks. Although this is more of a symbolic value, it changes also imply clear signals of a policy. Discount rate - almost always less than the rate of funds.
Treasury (Treasury). The U.S. Treasury is responsible for servicing the government debt and the decision to finance the budget. The Treasury is not talking about monetary policy, but his statements on the dollar have a strong influence on the currency. Occupy key positions:
John Snow, Treasury secretary, was appointed by President George W. Bush 3 Feb. 2003;
Robert M. Kimmitt, Assistant Secretary, has served since August 16, 2005;
30-year Treasury Bond (30-year Treasuries): 30-year bonds, also known as long bonds. They are compared with other bonds had more reliable, as provided by the American pravitelstvom.Eto most important indicator of inflation expectations in the markets. Interest rates on 30-year bonds is higher than on a Short-securities to offset the risk associated with increasing duration of the period. Markets likely to use quantity (the price), when it comes to levels of debt securities. As with all obligations of the 30-year treasury bonds is inversely proportional to price. There is no clear correlation between long-Bond and the U.S. dollar. But usually kept following relationship - falling value of the bond (increase amount) due to inflationary concerns may pressure the dollar. The rise may also be the result of strong economic data. Depending on the stage of economic cycle, strong economic data may have different effects on the dollar. If there is no threat of inflation - the strong economic data may raise a dollar. But from time to time, when the threat of inflation (higher interest rates), strong data normally hurt the dollar, due to the sale of bonds. Financial or political turmoil in the markets of third world countries is a hot interest in U.S. Treasuries due to their safe nature, thus helping the dollar.
10-year Treasury Note (10-year treasury notes): FX markets are usually checked with a 10-year-old tickets by comparing them with similar number abroad, namely, for the Euro (German 10 - year bund), yen (10-year JGB ) and the pound (10-year gilt). The presence of a spread (the difference in numbers) between the number of 10-year U.S. Treasury notes and U.S. commitments, affect the exchange rate. More U.S. treasury bills is generally beneficial to the U.S. dollar against foreign currencies.
3-month Eurodollar Deposits (3-month Eurodollar deposits): The interest rate on 3-month dollar deposits in banks outside the U.S.. It serves as a valuable benchmark for determining interest rate differentials to help estimate exchange rates. For example, let's take USD / JPY, a large interest rate differential in favor of the eurodollar against the euro - probably, USD / JPY will rise. Sometimes, because of the influence of other factors, this relationship is not supported.
The most important economic data coming out in the U.S.:
labor reports include two surveys: survey of 60,000 households, resulting in determining the level of unemployment, and research data in the Payroll nonfarm 375,000 businesses and government agencies, it is determined by the number of new jobs created in non-agricultural sector The average workweek and average hourly earnings.
GDP (gross domestic product) (GNP) is the final indicator of the economy should be seen primarily indicators that affect it and are its components (industrial production (Industrial Production), personal income and spending (Personal Income & Spending), costs construction (Construction Spending), etc.). Report on the GDP data are published Bureau of Statistics U.S. Department of Commerce (The Census Bureau of the Department of Commerce) each quarter. Statistics for the previous quarter is published on the third or fourth week of the month at 8:30 EST (New York), followed by revision. These come in the following sequence: preliminary (GDP advance) - revised (GDP provisional (revised)) - Final (GDP final).
CPI (comsumer price index) (consumer price index) determines the change in the level of retail prices for goods and services included in the consumer fixed "basket". As part of "basket" of goods represented 44.1% and 55.9% - services. It is the main measure of inflation in the country. Consumer Price Index is analyzed together with the producer price index (PPI). If the economy develops in normal conditions, the growth rates CPI and PPI can lead to an increase in basic interest rates in the country. This, in turn, leads to an increase in the dollar, as it increases the attractiveness of investing in currencies with higher interest rate. The indicator is influenced by such factors as the volume of money supply (aggregate M2) and producer prices and import prices (which are counted in calculating the index.) indicator published by the Bureau of Accounting Employment U.S. Department of Labor (The Bureau of Labor Statistics of the Department of Labor) in the middle of each month (Tuesday or Thursday) will soon after the PPI index to 08:30 EST (New York).
PPI (Producer Price Index) (PPI) measures how much the producers receive for their products wholesale. The index includes the prices of three types of goods: raw materials, intermediates and final goods. Is another way to determine the rate of inflation in the country (other than CPI). Published in the second full week of each month and reflects data from the previous month.
Nonfarm payrolls determines the number of new jobs created in neselskohozyaysvennyh sectors for the month. The data are adjusted to account for seasonal fluctuations and changes in base rates. Published by the Bureau of Accounting Employment U.S. Department of Labor (The Bureau of Labor Statistics of the Department of Labor) on the first Friday of each month at 8:30 EST (New York).
PPI (Producer Index) (PPI) reflects the dynamics of change in prices to sell their products domestic producers at the wholesale level implementation. The report is based on a monthly comparison of prices for 3500 types of products, factors which are calculated in proportion to their contribution to GDP. PPI was normalized to 100 at the end of 1982. The report is published by the Bureau of Accounting Department of Labor Employment, usually around the 11th of each month at 08:30 EST (New York).
NAPM index - a measure of the health of the productive sector, or more broadly across the economy, calculated on the basis of observations of the purchasing managers and analysis of data on new orders, production, employment, deliveries and inventory, which is considered in order of decreasing importance. The index is based on a survey of more than 250 companies within twenty-one industry, covering all 50 states. These go on the first business day of the month at 10:00 EST (New York) and reflects the data of the previous month. The value of more than 50% indicates that manufacturing is growing, while a reading below 50% means a fall. NAPM index is thought to be an early indicator of inflationary pressure.
CCI (Consumer Confidence Index) (index of consumer sentiment) reflects consumers' willingness to spend their incomes. The index is calculated from observations of 5000 households, non-representative sample of the population. High consumer power can mitigate the economic slowdown and to enhance its recovery. Published every last Tuesday of each month at 10:30 EST (New York).
Productivity report (a report on labor productivity) indicates how many products produced by one worker. Many economists believe that productivity growth enables an economy to grow, while not causing the inflation rate as opposed to wage increases. The report is published seven numbers (or the nearest working day) in January, April, July and October, 8:30 EST (New York).
ECI (Employment Cost Index) (index of labor costs) is used to track inflation. Determines the change in the cost of wages, profits and bonuses for certain groups of employees. The reason this indicator is used to determine the level of inflation is simple: an increase in wages will soon lead to higher prices (ie inflation). In conjunction with a report on labor productivity ECI can show whether a reasonable increase in wages. The report is published on the last working day of January, April, July and October at 8:30 EST (New York).
Beige Book (beige book) - known informally as the Fed report (official name - "Summary of comments on the current economic situation in the Federal Reserve Districts"). Is a digest of reports 12 reserve banks in the U.S. that characterize the sphere of industrial production, services, agriculture, financial institutions, labor market, real estate market. Is an indicator of future actions FOMC. Published 8 times a year on Wednesday, two weeks before the meeting of the Federal Open Market Committee. The latest report was published on November 30 14:15 EST (New York).
Cross Rate Effect
Price of the dollar against the single currency are sometimes pushed another currency pair (exchange rate), which may not include the dollar. For example, a sharp rise in the yen against the euro (falling EUR / JPY) may lead to an overall reduction of the euro, including a drop in EUR / USD.
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