Tag: interest rates

Is the NZD rally justified despite RBNZ rate cut in Dec’2015?

Is the NZD rally justified despite RBNZ rate cut in Dec’2015?

Financial Markets Explained
The Reserve Bank of New Zealand met on December 9th for its final monetary policy review for the year. Heading into the RBNZ's monetary policy event, the markets were widely divided on whether the New Zealand Central bank would cut rates or not, given that the it is an almost certainty that the US Federal Reserve would hike rates at the meeting on December 17th. However, the RBNZ did indeed deliver a 25 bps rate cut, bringing the overnight cash rate from 2.75% previously to 2.50%. In the monetary policy statement from the RBNZ which can be read here, the Central Bank noted that it felt justified that the current rate cut would help New Zealand's inflation move back into the 1.0% - 3.0% target range by mid 2016. The Central bank also accepted the view that inflation will remain weak in t...
German DAX – Mind the weekly double bottom

German DAX – Mind the weekly double bottom

Technical Analysis
From the update on German DAX a few weeks ago, the index which was trading at 10009 managed to turn around from the lows to close last Friday at 10188.4. The equity index was supported by the fact that the ECB had signaled its willingness to expand the sovereign bond purchases. Although nothing was confirmed, the fact that the option is now on the table has been supportive for the German DAX Index. It remains to be seen if indeed the ECB will expand its balance sheet and of course, it all depends on how the Eurozone data continues henceforth. So far, the markets were surprised with a pickup in the Eurozone GDP which increased to 0.4% for the second quarter, beating estimates. However, inflationary pressures remain to the downside especially in light of Crude Oil prices being forecasted...
Forex Fundamentals: Interest Rates and Central Banks

Forex Fundamentals: Interest Rates and Central Banks

Financial Markets Explained
At a time when interest rates across the developed economies of the world are at record lows, Interest rates is a fundamental economic indicator that cannot be ignored. No wonder, why speeches from Central Banks and monetary policy minutes are so eagerly watched every month. On average, around the release of this news, which also includes interest rate decisions, the respective currencies tend to be very volatile and the price action leading into a few hours after the release usually tend to change trend or continue the prevailing trend. Understanding Interest Rates The concept of a stronger currency attracting higher interest rate in comparison to other currencies forms the basis of the interest rate parity. Investors tend to seek high yielding currencies, or in other words, currencies ...
Operation Twist – What is it all about

Operation Twist – What is it all about

Economic Indicators
Operation Twist is a federal reserve monetary policy involving buying and selling of bonds in an effort to push down the interest rates on mid term and long term interest rates. In Operation Twist, the Federal reserve sells the short term or mid term treasury bonds and uses the cash to buy the long term treasury bonds thus generating demands and reducing the interest rates. In bond markets, when there is a demand for bonds the interest rates are low and vice versa. The term Operation Twist was named after the Chubby Checker song and was first tired in the 60's. The name comes due to the graphical representation it has on the yield curve. A typical yield curve has a linear upward sloping yield. The Operation Twist's actions aims to twist the end of the yield curve which gave rise to ...
LIBOR Explained. What are LIBOR Rates

LIBOR Explained. What are LIBOR Rates

Financial Markets Explained
LIBOR, an acronymn for London Interbank Offered Rate has become a standard for banks in most countries such as the US, Canada, Australia, Japan, Denmark, New Zealand, Switzerland and of course the UK as a reference rate for borrowing or lending marketable loans between banks. LIBOR rates, compiled by the British Bankers Association (BBA) are published everyday at 11 GMT. The BBA dates back to the early 1980's and was first used in the financial markets in 1986. The LIBOR rates, compiled by BBA is made up participating banks representing countries in each of the quoted currencies (AUD, CAD, DKK, EUR, JPY, USD, NZD, GBP, SEK, CHF). The banks mention what rate they would be charging for the currency during a specified period of time, which could from overnight loans to as long as 12 month ...