Category: KYC & Compliance

“To say FX Volatility is Low is an Understatement”

to put the current “tranquil” state of the FX markets in context, it’s necessary to look back in history…way back. The stability of the US Dollar against the Japanese Yen that is being observed in FX exchanges today has not been seen since 1977. Using a variety of proxy modelling techniques, it could also be stated that the Euro Dollar has not been this tame since 1979.

Although many would view these observations as simply part of a larger pattern occurring in the international economy, the actual data points to something else entirely. According to George Saravelos, a currencies analyst at Deutsche Bank, “The decline in currency volatility is unusual compared to other asset classes.”

So, what could be the cause of this unique situation? Analysts agree that current economic conditions would not promote this level of stability. In fact, both the S&P 500 and 10-year US Bonds are experiencing over a 1% increase in volatility when compared to levels witnessed in the early 1990’s. Following the “taper tantrum” that occurred last summer, as well as a variety of unexpected policy surprises coming from the ECB, it seemed reasonable to assume that volatility would shake up for the FX markets for a reasonable amount of time.

One possible explanation for the placid nature of the currency markets could be a shrinking gap between buy and sell prices due to increasing competition and ever more powerful FX trading technology. This year alone, the buy and sell spread for FX exchanges at large was reduced by 20%. As automation and complex algorithms take over the marketplace, some say, it is inevitable that stability will slowly embed itself within the infrastructure of the FX markets.

Another possible theory points to the growing shift towards electronic trading platforms as opposed to traditional inter-bank voice trading. This shift is not just relegated to the FX markets. Following recent changes outlined by Dodd-Frank, many of the asset classes within the US fixed income market are also being transformed and revolutionized by electronic trading systems.

FX traders shouldn’t be overly worried that the glory days of foreign exchange are over. That being said, some experts are saying that the highs experienced earlier this year may not return for quite a while. According to Saravelos, this unheard of stability, “is also a warning shot on the impact that technology and regulation can have on other asset classes as competition and the market mature.”

GBP EUR USD AUD Foreign Exchange Rate Forecasts & Predictions June 2014

The world of foreign exchange (forex) trading is arguably one of the most complex and nuanced financial marketplaces on the planet. Featuring an array of finely tuned pricing mechanisms and intricate arrangements, the process by which currencies lose or gain value relative to one another has become a trillion dollar industry.

Market analysts have released their exchange rate predictions for the month of June, and their assertions seem to coincide directly with recent announcements in key nations around the world.

The British Pound Sterling has made further gains, expanding its competitive edge on international currencies due in large part to recent announcements that manufacturing data has demonstrated healthy growth. Although the Bank of England’s recent statements on monetary policy are causing some to worry that the price rally being experienced by the Pound Sterling is only temporary, analysts are recommended a neutral to positive outlook on this particular currency.

Similar successes cannot be claimed by the Euro Dollar, which has suffered slightly due to recent revelations that the ECB might continue to reduce interest rates, further driving down the value of this already beleaguered currency. Combined with disappointing manufacturing news, the Euro is believed to currently be in a period of decline. Analysts have adopted a negative outlook on this particular currency.

The US Dollar’s positive manufacturing reports will most likely keep this currency within previously established ranges compared to the Pound Sterling. That being said, the recent Michigan sentiment index is largely negative, potentially undercutting any positive outlook nurtured by the overall manufacturing report. Analysts currently believe that the US Dollar sits at a neutral to positive outlook.

The Australian Dollar has been impaired slightly by recent reports illustrating weak domestic building numbers. Because of this, it is unlikely that the Reserve Bank of Australia will move to strengthen the national currency using an interest rate hike. According to analysts, the Australian dollar currently sits at a neutral to negative outlook.

Overall, the assertion could be made that the “threat” of volatility in the forex marketplace will be greatly enhanced or reduced by policies currently being decided upon in Europe and Australia. That being said, many of the world’s major currencies stand to benefit from any sign of weakness in these aforementioned economies.

Global Concerns Eased Surrounding AUD/USD

It’s common knowledge that the volatile dynamics of international politics and conflicts have serious repercussions on the FX markets. In recent months, the upsurge in geopolitical tension between Russia and the Ukraine, as well as US military intervention in Iraq against the ISIS militant group, have resulted in a series of substantial price swings of the US dollar, the EU Dollar and the GBP. The EU Dollar recently retreated to a nine-month low, due largely to its inability to withstand investor scrutiny in light of Russia’s aggressive moves. As could be expected, the GBP shed value in tandem with the EU Dollar.

Optimism, however, isn’t far off. Although the US Dollar declined in value following the initiation of airstrikes in Iraq, prices have not been significantly affected. A recent, temporary ceasefire between Hamas and Israel has also helped provide a small level of comfort and reassurance for those assessing their positions in the US Dollar.

That being said, tensions have yet to fully abate in Easter Europe, where the Russian military remains poised to launch a series of devastating strikes against Ukraine. The sanctions levied against Russia have served as a moderately effective deterrent against Putin’s militaristic endeavours, although no formal withdrawal has occurred as of yet. Although Russian governmental representatives have declared that the military exercises they had undertaken near the border with Ukraine were now over, investors remain somewhat cautious.

The Australian Dollar recently dropped to two-month lows against the US Dollar. This decline is largely due to statements by the Reserve Bank of Australia declaring its intentions to cut growth and inflation forecasts while, simultaneously, keeping interest rates stationary.

As is becoming increasingly common, however, even the most informed of predictions can change substantially when global dynamics are as volatile as they currently are. Although the recent Ebola outbreak has yet to produce any substantial head-waves in the FX markets, any indications that the deadly virus had established its presence in Europe may also exacerbate existing volatility. Yet again, only time will tell if such issues will transform into pressing concerns requiring immediate attention.

It is likely that the vast majority of international investors will remain intently focused on current events until these substantial global conflicts reach some level of long-term resolution.

Gold Enjoys Reprieve Around $1240

Although gold prices have fluctuated significantly over the past week, a small margin of confidence has been restored following the stability that this precious metal seems to exhibiting. Falling sharply from a well-established $1275, gold reached a four-month low near $1240, a move which, for many, was as disappointing as it was financially painful. That being said, it seems that this particular price point may signal the full extent of the ‘damage’, as further losses have not been seen. Given the relative stable nature of the precious metals marketplace, significant fluctuations in gold price are bound to quickly draw attention.

That being said, this new pricing base is markedly lower than the recent high of $1315. Although many believed that market volatility around gold was largely reducing, the fast drop to $1240 has caused some to rethink their original predictions and quickly adopt new tactics in this particular niche of the precious metals marketplace.

The price of gold is, essentially, determined by a variety of factors. The health of national currencies is one of the most significantly influential forces when assessing the overall strength of a commodity. With this in mind, it becomes much easier to understand the relationships between the price of gold and the economic health of the world’s prominent economies during the 2008 financial crisis: as markets plummeted, the price of gold soared. Gold is, due to this ‘sovereignty’ often thought of as a “safe haven” during periods of economic turmoil.

With a number of important policy decisions soon to be announced, including the ECB’s potential disclosure of new policy options and the U.S. non-farm payrolls data, gold traders are waiting with somewhat bated breath to see what exactly may happen to the price of gold in the coming weeks. Were the ECB to announce new, looser regulations, many believe that the price of gold would inevitably rise. That being said, the loss of value in the Euro may also serve as a prominent factor in assessing the value of gold in the coming weeks. Volatility, it seems, may be returning to the precious metals marketplace after all.

Facebook Wants to Start Handling Your Money – Here’s Why

Gotten swept up into the social media craze in recent years? That’s understandable. After all, never before in the history of the human experience have individuals been able to explore so many elements of their daily lives simultaneously, ranging from pertinent world and local news to advertisements, product placements and social updates from friends and family.

That being said, Facebook is ready to take their immersive experience one step further by offering a convenient and powerful method for undertaking e-commerce transactions with many of the world’s larger retailers as well as between Facebook friends.

In many ways, this information should come as no surprise. After all, virtually every other major internet and tech platform has begun to release tools that individuals and business owners can use to quickly transfer money, pay invoices, etc. One of the more prominent technologies featured recently has been Bitcoin, the revolutionary crypto-currency that has quickly risen to become one of the most talked about and, simultaneously, controversial tech innovations in years.

Currently, there’s no concrete details on whether or not Facebook’s system will handle Bitcoin transactions, nor is there really any information at all! The news leak concerning this payment system was actually instigated by a computer techie at Stanford who discovered lines of existing code within the Facebook infrastructure that allowed for payments to be processed and undertaken via the messenger app.

This, really, is the only information that is actually available at this point. It stands to reason, however, that Facebook would be considering a platform such as this to unleash in the upcoming months, if only to remain competitive with the other tech giants who are operating in similar fashion.

A payment system would also ensure an even more regular supply of traffic to Facebook, which is only good news to investors and shareholders. It’s obvious to see, therefore, that any one of several reasons could be used as justification for implementing this new program. Because of this, it will be quite interesting to see exactly how this product rollout occurs and, more important, when. Timing is everything in the tech world, and numerous businesses have lost out to the competition simply by letting first mover advantage slip out of their fingers. If Facebook is serious about gaining respect and competing with the nation’s other tech giants, it’s definitely important for them to consider just how much time and money they are willing to invest in this particular enterprise.

Forex – Pound Sterling Near 1-Year Lows

Forex traders may be in for a somewhat bumpy ride in upcoming months, as the Pound Sterling has fallen to a near one-year low following news that the UK’s economic growth may be slowing. Recent government reports have shown that the UK’s service sector is expanding at the slowest rate seen in the last 17 months.

Although such news may initially appear to be somewhat grim, business optimism has not fallen as much as may be expected. In fact, the vast majority of firms in London’s financial sector continued hiring staff. These disappointing figures are also serving as a strong prediction that the Bank of England will, at least for the time being, keep interest rates at their current levels in an effort to promote economic stability. From the perspective of GDP, the UK experienced .7% growth in the third quarter of this year, while a .5% expansion is considered the likely outcome of fourth quarter activity.

The rise in the value of the US dollar is not only the byproduct of economic weakness in Europe. The now exclusively Republican-controlled House and Senate are considered to be a huge show of support for the US dollar. Government gridlock has, historically, contributed to currency weakness. Fortunately, the United States no longer has to suffer through the degree of turmoil that had embroiled their government over the last two years.

Investors are currently awaiting the outcome of a European Central Bank meeting that is occurring on the heels of a surprise stimulus move by the Japanese government. Many industry analysts are now predicting that the ECB will engage in a similar strategy, injecting much-needed funds into the Euro zone.

Related data points regarding the economic health of the Eurozone continue to be somewhat disappointing. Retail sales have dropped 1.3% on the monthly charts, which exceeded predictions for a .8% overall decline. Whether or not these factors will strongly influence the value of Pound Sterling remains to be seen. If the ECB were to intercede, it is likely that currency value fluctuations would follow suit. It will be interesting to observe exactly how these scenarios play out in the final month of 2014, and what expectations are established for the opening months of 2015.

Forex Trading for Beginners: Advice from the Experts

The world of foreign exchange holds a special appeal for many novice traders, due in large part to the fact that these markets function in a manner that is entirely unique within the finance industry at large. With less regulation than the traditional securities exchanges, near round-the-clock trading and the ability to acquire (and lose) large sums of money quickly due to leveraging, it should come as no surprise that foreign exchange attracts countless “newbies” on a daily base, many of whom are looking for a quick and effective way to make substantial profits in this dynamic marketplace.

Unfortunately, the world of foreign exchange trading is not an easy nut to crack. In fact, the Forex markets are widely considered to be some of the most sophisticated and, yes, confusing within the financial markets as a whole. There’s no reason to avoid jumping into these markets, however, as a slow, patient introduction to the in’s and outs of these markets may allow traders to adopt a more responsible approach to forex trading which helps to ensure that they won’t break the bank on their first outings.

Experts agree that one of the best tools for novice traders are the Forex simulators that can be found on virtually every major trading platform in existence today. Using these simulators, individuals can test out their specific trading strategies without having to place real money on the line. While these simulators can’t account for trading strategies fueled by fear, greed, superstition and any one of countless other human emotions, they do allow for smart practice and critical observations of how these markets function.

Experts agree that one of the best tools for novice traders are the Forex simulators that can be found on virtually every major trading platform in existence today. Using these simulators, individuals can test out their specific trading strategies without having to place real money on the line. While these simulators can’t account for trading strategies fueled by fear, greed, superstition and any one of countless other human emotions, they do allow for smart practice and critical observations of how these markets function.

Due to the fact that these markets do behave in a rather volatile fashion, expert traders commonly advice novices to adhere closely to what is commonly coined the “golden trading rules”, which include discipline, patience and money management. As stated previously, the Forex markets often involve substantial leverage, which can prove to be disastrous for those who aren’t completely sure of what they are doing. There are countless stories of individuals who have gotten overly eager in their early days of trading and lost tremendous sums of money due to faulty trading strategies and an overly zealous approach to leverage.

More than anything, the most important tool for any novice trader who is serious about finding their way into the forex markets is extensive practice. The only way to understand the nuances of these markets is to observe how they react to varying international situations.

Is the Bitcoin Boom Over for Mining Software Providers?

When the Bitcoin hype machine tapers down, two potentially dangerous actions occur: 1.) people stop investing in the coin, which, given the absolute need for early-stage adoption, is causing significant hurdles for traders and investors alike, and 2.) Bitcoin miners stop mining Bitcoin due to a substantially decreased profit margin. Given the fact that the successful operation of the Bitcoin platform relies upon the miners to enable the transaction verification platform, commonly referred to as the Blockchain, a lack of miners means more than just a general loss of interest in this notorious alt-coin; it could mean the end of the entire operation.

It’s also important to remember that the process of mining bitcoin becomes inherently more difficult and cost ineffective as more coins are placed into circulation. The massive spike in Bitcoin miners in recent months has served to drive the operating expenses of competitive Bitcoin miners much higher than they ever could have imagined. As more and more hardware is required to mine Bitcoins, even the most experienced miners have begun to wince at the expenses they are incurring, especially as the price of Bitcoin continues to fall.

Ultimately, there are essentially two viewpoints one can adopt when discussing the current Bitcoin trends with an eye towards predicting the future. As there really exists no discernible trend or precedent for a product or idea such as Bitcoin, even on the most advanced bureau de change software available today, it’s anyone’s guess as to what exactly will happen. The coin will either flourish…or it won’t. In order for Bitcoin to remain a trending topic, however, Bitcoin miners are going to need to get excited about mining yet again. This, truly, is the first step towards keeping the Bitcoin operation in the running for status as a revolutionary product.

Is the Bitcoin boom over? It very well could be. Numerous experts have already proclaimed that the coin will be virtually worthless in coming months. As with all things revolutionary, however, a “wait and see” approach may be the best available. One thing is for sure, however: Bitcoin has dramatically redefined how we think of payment, currency, and bureau de change software in the 21st century, and that in itself is a commendable feat.

Bitcoin can be “the Internet of money” says Google Analyst

Google analyst Andy Yee is the latest to wade into the bitcoin regulation debate, concluding that any legal framework should be based on an “adaptive” approach.

Politicians and policy makers alike have expressed concerns about bitcoin’s lack of regulation.

Yee has proposed that rules should apply to services that actually handle money as opposed to those that create the digital currency software. He wrote:

“The logical and user layers are populated by private actors from the bitcoin community and real economy respectively. These actors are small and can easily escape from regulation and enforcement. At the information layer, intermediaries of various kinds have emerged to bridge the two networks. Their position in the Internet architecture enables them to capture information flows and identify wrongdoers. In addition, they are larger and more established actors, making them more amenable to state regulation.”

In his article for Internet Policy Review, Yee suggested using similar laws and rules to those already used to regulate financial companies:

“These laws and regulations of general applicability can in theory be applied to the emerging non-financial, information-based companies in the bitcoin economy. But a balance needs to be struck between eliminating instances of gatekeeper-aided wrongdoings and avoiding excessive burdens on gatekeepers.”

When addressing the issue of criminal useage, Yee wrote:

“Criminals need to go through intermediaries in this layer to exchange between the bitcoin and real economies. As a result, these exchange mediums collect and retain significant amounts of information, which can be utilised by law enforcement to detect money laundering and the underlying criminal activity.”

In other words, at some point the criminals will want to transfer their bitcoin currency into recognisable money and it is at this stage that they can be caught.

Various Google employees have voiced their opinion’s about bitcoin. Its Chief Economist Hal Varian has been quoted as saying: “I think something like this technology will take hold in the future but I am not particularly optimistic about bitcoin because it suffers from being the first in the area.”

Meanwhile, earlier this year, Google’s Director of Ideas, Jared Cohen, declared that bitcoin was “inevitable”.

Here in the UK the European Banking authority has advised that European banks should not deal in virtual currencies until a regulatory system had been developed.

We shall continue to monitor developments…

Don’t exchange currency at the airport – they have the worst exchange rates

After disembarking from a lengthy international flight, the chances are quite good that you’re ready to seize the day and jump headfirst into your vacation plans. That being said, industry experts agree that certain items on your pre-entertainment “to-do” list, such as exchanging currency, are best done after you have left the airport.

Recently, the British pound has made unprecedented gains against the Euro, reaching a record 1:1.35 conversion rate. For those traveling into EU countries for vacation, this is likely to produce a variety of joyful responses. That is, of course, unless you are exchanging your currency into the EU dollar at local airports, which have now been reported to be offering as low as 1:1.06, a rate that is too far below international standards to ignore. With exchange rates settling near 1:1.30 online and 1:1.26 at a large number of high street banks, it seems almost impossible to believe that airport exchange services have the audacity to venture as low as they seem to be headed. This would be a scandal, but tourists are, nevertheless, continuing to opt into these predatory banking practices which are dramatically reducing the value of their financial resources during travel.

When asked to discuss the current exchange rates, Simon Phillips, a member of No1 Currency, stated, “The rates offered by money exchanges at the airports are terrible, targeting travellers who have no option. The clear message is to plan ahead and order online.”

Fortunately, tourists have a number of options available to them after they have decided that they are ready to exchange their currency outside of this predatory airline environment. A number of websites are currently available which feature outstanding currency exchange rates for a wide array of currency pairs. For those who would prefer to avoid online exchanges, it is highly recommended that all available exchange options at local banks be explored before visiting an airline shop.

Although the value of today’s in-demand currencies is likely to shift over time, savvy travelers can continue to find the best possible exchange opportunities to maximize the value of their financial resources. As always, a bit of persistence will likely pay off in the long run. Those who are passionate about finding the best possible deals on their exchange rates can do so by spending the time needed to locate the best possible exchange services. With the summer holiday season just around the corner, this information really couldn’t come at a better time!

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