Forex Investment and Currency Trading

The stimulus package likely will draw on some of the components of the Obama economic platform and include a mix of proposals:

Tax cuts for middle and lower income households. Unlike the Economic Stimulus Act of 2008, which provided $100 billion of tax rebates, this stimulus package will include “rebates or credits” that will be associated with actual rate cuts or new tax credits or expanded deductions that were in Obama’s platform. As such, they will have be relatively more permanent in their impact.
Further subsidies for distressed homeowners. This will include funding for refinancing mortgages and providing direct subsides to distressed [...]

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Another fiscal stimulus package tops President-elect Obama’s economic agenda. Congress is expected to convene shortly to debate a package, and at least a portion of it will be enacted before year-end, the rest in early 2009. Market expects a minimum $300 billion package to include low- and middle-income tax cuts, subsidies for distressed homeowners, job creation programs, block grants to states, liberalization of unemployment insurance and tax credits for home purchases. Other components of Obama’s economic platform, including universal health care coverage, higher taxes on upper income taxpayers, along with initiatives in trade, labor and credit/consumer rights policies will be high [...]

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Amid tentative signs that government attempts to unclog the credit markets may be starting to work, last week’s economic releases pointed to recessionary conditions. Large broad based declines in September retail sales indicated that consumption is declining rapidly this quarter, following a sizable drop in Q3, while manufacturing activity is in free fall. Falling consumer confidence is likely to further delay housing recovery. Combined with a large-scale reduction in capital spending plans, market foresees a substantial recession lasting into at least 1Q 2009, with sharp rises in unemployment extending past midyear.
As term Libor rates cautiously crept lower last week and [...]

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Estimates of the non-local assets of the European banks (largely USD) :
UK              $ 6.4 Tr
Switzerland  $ 1.4 Tr
Germany     $ 1.0 Tr
France        $ 1.0 Tr
Netherlands $ 0.6 Tr.
Ireland         $ 0.6 Tr
 
Without USD Deposits how do you fund these positions day-over-day?
1.  a currency mismatch…take the FX risk
2.  fund locally and hedge with FX forwards and options
3.  borrow USD from US banks  (see below the interbank cost of Dollars depending on where you start)
4. raise USD in the USD commercial paper market
5.  go to your local Central Bank and borrow via swap facilities provided by the FED
6. sell the USD assets into a [...]

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