Forex Investment and Currency Trading

U.S. real GDP eked out a small gain in 1Q 2008, as an improving trade balance and a pickup in inventory accumulation offset declining final sales to domestic purchasers. In the first quarterly decline in U.S. domestic demand since 4Q 1991, consumer spending slowed appreciably and capital spending declined modestly, while housing construction continued to collapse at a record pace. Strong federal defense expenditures offset slowing state and local government purchases, exports expanded at a solid pace, and inventories swung from decline to slight accumulation to push U.S. national output up slightly. Market expects little change to the slowly declining [...]

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Will the next ECB move be a hike? Within five weeks, the market has turned from pricing in two rate cuts by October this year to now expecting a 40% probability of a 25bp rate hike. At least half of this swing in market expectations makes perfect sense.

In February, markets had been too eager to believe that the ECB would simply follow the Fed and cut rates aggressively in response to a perceived credit crunch. The call for very aggressive ECB cuts ignored the fundamental differences between the two sides of the Atlantic, including the very different divergence of the [...]

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LIBOR has improved over the past week to levels that seem to more appropriately reflect current term funding rates, although spreads continue to remain elevated.
The Treasury Curve has cheapened and flattened recently as rising funding needs for fiscal stimulus and the Fed’s various facilities have helped cheapen Treasuries particularly in the front-end of the curve.
The back of the yield curve, in the bond sector, has also seen noticeably cheapening, particularly on an asset swap basis, with 15y paper at its historic cheaps and at extremes to other sectors of the curve.
Explore the cheapness in the 15y sector and recommend entering [...]

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Oil prices hit yet another record this week, as did gasoline prices, and both have reached records in real terms. The psychological impact of gasoline prices exceeding $4/gallon for the first time in some areas of the country is likely to hurt real spending, and the narrow spread between the average retail price and the wholesale price suggests retail prices could jump another 10 cents by month-end. Even excluding any psychological impact from $4 gasoline, it is estimated that each 10 cent rise in the price of gasoline drains about $10bn from consumer discretionary spending.
Therefore, with gasoline prices more than [...]

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