Looking Ahead: October 29 through November 2, 2012

Equities were lower last week on mixed economic data and disappointing earnings reports. Unease about the European debt situation continued to make investors wary. The Federal Reserve, Bank of Canada and the Reserve Bank of New Zealand chose to leave their monetary policies unchanged. Both UK and U.S. first estimates of third quarter GDP were better than expected. Flash PMIs however, showed continued contraction everywhere but in the U.S. The Bank of Japan meets Tuesday and is expected to add to its asset purchase program. The week is a busy one with key economic data on tap globally along with a continuing onslaught of earnings reports. Among the important data to be released are final manufacturing PMIs globally, Japan’s monthly deluge of new economic data and in the U.S. a slew of reports culminating in the employment situation report on Friday.

Looking Ahead: October 22 through October 26, 2012

China’s slew of economic data was in traders’ focus during the market week. Investors also awaited developments from the EU summit which took place on Thursday and Friday. U.S. data provided the usual mixed bag but were generally positive, especially on housing.

This week, traders will focus on the FOMC meeting announcement. Also on tap are the Bank of Canada and the Reserve Bank of New Zealand policy decisions. The data highlight of the week will be the sundry flash PMI indexes from Europe and the U.S. The UK will provide its first estimate of third quarter gross domestic product.

 

 

Looking Ahead: October 15 through October 19, 2012

Key data are on tap this week including the German October ZEW survey along with the UK’s labour market report, consumer prices and retail sales. But focus will be on the latest data deluge from China for the month of September and for the third quarter as well. Both the Bank of England and the Reserve Bank of Australia will release minutes of their respective October meetings. The minutes from the BoE will provide some sense from the policy debate earlier this month on how likely the MPC is to expand its asset purchase program at its next scheduled meeting on November 8th. From the RBA, analysts will be looking for more information on why the Bank cut its policy rate a month sooner than was generally expected and will be looking for clues on whether there will be another quarter point cut before yearend.

Looking Ahead: Week of October 8 through 12

The first major release is midweek with the Beige Book. The Fed is focusing on the labor market and comments on that sector will be highlighted. The next major mover is international trade with the export component the key focus as growth has been wavering in Asia and Europe. Bond traders will pay special attention to the producer price report as headline inflation has bounced in recent months on volatile energy costs. Finally, we get a reading on consumer sentiment for early October. Various surveys recently have indicated modest improvement in the mood of the consumer.

EUR/USD Weekly review October 1, 2012

Looking Ahead: October 1 through October 5, 2012

Investors kept their eyes on the situation in Spain. Economic data were mixed globally. Four central banks are on tap during the first week of October. The Reserve Bank of Australia announces on Tuesday followed by the Bank of England and the European Central Bank on Thursday and the Bank of Japan, Friday. A plethora of purchasing managers’ indexes for September will be released globally. Going into the fourth quarter, investors are looking ahead to see whether bond buying programs announced by the European Central Bank and the U.S. Federal Reserve will be reflected in improving economic data. Mainland Chinese markets will be closed for week-long holidays from Oct. 1 to Oct. 7, while the Hong Kong market will remain closed on Monday and Tuesday.

How Your Forex Broker Makes Money

Trading forex is great - online access to your account so you can trade anywhere in the world, very high leverage which enables you to make a significant amount of money from a very small account, the trades are commission-free and even the spreads in forex are extremely tight. Given that you, the forex trader, has a number of advantages, have you ever wondered how your retail forex broker makes money? And why are there so many retail forex brokers out there? After all, forex broker advertisements are everywhere and the competition seems to be very stiff. So how, exactly, does your forex broker make money? The answer might surprise you. Your forex broker assumes that you will lose money over the long run when you trade. Given that 95% of forex traders lose money, it is a very safe assumption. Every broker has to decide whether a new account will belong to the group (95%) of traders that loses money, or the group (5%) that makes money. If I gave you a coin and said that it would land on heads 95% of the time, I think you would probably want to keep the coin so that you could use it to win some bets with your friends and 2) always assume the coin would land on heads. This is precisely what your forex broker does. Every new account is assumed to belong to "group B" - those traders that will lose money. Since 95% of the traders belong in this group, your broker is only too happy to assume that you belong in this group. After some time, if you have consistently made profits, your broker will re-assign you to "group A" - these are the lucky 5% of traders who consistently make money. After you have joined this group your broker will lump your trades with all of the rest of group A and hedge against your trades. So, for example, if all traders in group A have bought the EUR/USD your broker will place a trade in the interbank forex market to offset any profits group A make on this trade. Basically, your broker puts up with group A traders but is really interested in gaining group B accounts. This is because if a trader in group B loses $7,000 - that is, he completely blows up his $7,000 account, then the broker gets all of that money. The broker does not make money on the spread; the broker makes money on the losing accounts. This is also why brokers are constantly advertising for new customers. The brokers need "fresh blood" to keep making money, many of the traders in group B will give up on trading or move to another broker. So, the next time you see a forex broker advertisement you will know who they are really after.