Connect with us

Forex

GBP Soars in Forex Market as Johnson’s Conservatives Emerge Victorious

mm

Published

 on

GBP
  • British Tories win to seal biggest majority in decades.
  • Brexit by January 31st promise looking more likely.
  • Pound surges into the weekend.

The British Pound made further gains this week to cap a very bullish few days for the nation. The currency posted gains for the third consecutive week at 1.33 against the U.S. Dollar in what was a frantic, rollercoaster couple of days. The currency has now gained 3% overall since just the start of December.

Tory election win brings new sense of hope

A lot was riding on the British election, the outcome of which was always going to be hugely significant in both the direction of the currency and the ongoing Brexit journey. As it happens, a sweeping victory by Boris Johnson and his conservatives seems to have done the trick for now.

Johnson and his winning MPs have proven that this impromptu general election, criticized by many, has turned out to be something of a masterstroke in the overall scheme of things. It was a favorable outcome that had looked likely for some time, but by a distance that nobody could have predicted. Even the most prudent of pollsters would term it a landslide.

Brexit door swings open further than ever

It is nothing short of a saga that has rolled on and on. The debate and digression were arduous at the best of times. One thing that has been made abundantly clear by the conservatives’ biggest parliamentary majority in some three-decades? – The people have spoken. The electorate too had become tired of the impasse. This is something which the confidence and subsequent spike in the GBP has also backed up.

It now looks increasingly likely that the promise made by PM Johnston that Brexit would be brought about before January 31st will be proven true. Naturally, this is good news for both he and most likely the British currency on the world stage, at last in the short-term.

Parliamentary members will reconvene on Tuesday of next week for the official swearing-in from their 365 seat haul with a jump down to business and possible cabinet reshuffle looking very likely as early as next week.

Will GBP strength hold up in the coming weeks?

All of this moving and shaking leaves the GBP in a very interesting position as the markets reopen on Monday and in the coming weeks and months. The currency had remained quiet in the early part of last week, poised for what was to follow. What did was an almighty surge on Friday followed by a slight correction that still leaves Sterling in a very strong position.

The fact that the US Dollar continued to show its weak side this week. Fed chairman Powell kept their rates policy unchanged for the moment. This is bound to have helped bolster the Pound in the Forex market at least somewhat. Moving into next week, all eyes will be on the Bank of England monetary report to see how the currency reacts. For now though, things are looking good for Boris and his GBP.

 

 

Spread the love

Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world. A keen trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.

Forex

What is Hedging in Forex?

mm

Published

on

What is Hedging in Forex?

Hedging as it applies to the forex market and trading, at its most basic form, is a strategy to protect you from losing big in a certain market position. There are many types of hedge that move from the very simple, to the more complex if you are an advanced trader, but the premise is the same. To protect your position in one currency pair by placing a trade within that same market in the opposite direction.

The Fundamentals of Hedging in Forex

The first point to note is that hedging is not always permitted by all brokers. Therefore, you should check their policy first. As mentioned, the majority of traders who engage in hedging are doing so to provide themselves with a form of protection in the event of adverse market changes. By nature, hedging is particularly common in times of market volatility when the movement is quite unpredictable.

Hedging in the forex market is also more common than in many others. This is often due to the fact that the forex market can be seen as slightly more volatile than many others that are traded. As a forex trader, there are several types of hedge that you can place to protect your position in the market.

Forex Hedging Strategies

While there are a range of hedging strategies available that vary in complexity, here we will outline some of the most common you can utilize depending on your broker policy and level of experience.

Simple Forex Hedging

This strategy is also known as direct hedging. It is one of the most widely used, and easy to understand hedging strategies. Direct hedging occurs when you open a position to buy (or go long) on one currency pair. You then open the same position to sell that currency pair (short).

There may be a number of reasons for doing this, but in any case, a few things happen. You now have two open positions in exactly the opposite direction. Although you do not make a profit on the actual hedge itself, it does allow you to keep your original position. This means you do not have to close your original position for a loss, and can instead start to make money through your short position. Maintaining the original position also means you could again profit if the market trend reverses.

Multiple Currency Hedging

Moving into one of the more complex hedging strategies. If you are trading in multiple currency pairs, then this strategy could be effective to a certain extent for you. Multiple currency hedging takes place when you but a long position, and a counteracting short position in one of those currencies.

For example, you may take a long position in the GBP/USD market, and a short position in the USD/JPY market. In this example, you are protected against your USD exposure to a high degree. This strategy though does not cover movements in the other currencies you are exposed to though. In these cases, if the JPY, or GBP were to fluctuate, you would still be exposed.

A variation of this strategy also sees traders take long and short positions in currency pairs that are positively correlated, meaning that if one currency pair goes down, the other will go up. Such an example of these positive correlated pairs may be the GBP/USD, and EUR/USD. So, if you hold a buying position in one, and selling position in the other, in theory, they should offset. Still though, this is not as exact a strategy as a simple direct hedge.

Forex Options Hedging

An option in forex is an agreement to exchange at a specific price in the future. It is a common instrument used by forex traders who wish to hedge their position. Again, this is referred to as something of an imperfect hedge since it can still result in some losses for you as a trader.

Using an example of how you may buy a forex option to hedge your risk, consider the following:

You have gone long on the EUR/USD at $1.08 expecting the pair to go higher. You are now concerned though that it may fall further on the release of economic data coming in the next few days. In order to mitigate this risk, you may but a put option with a strike price at something like $1.07 on the pair, and an expiration date of the option at some point beyond the data release.

If the pair then does go lower, the trader is paid out on their option based on the contract conditions set. If the news does not materialize, and the pair continues to go higher, then the trader can continue to hold their long position and will have only lost the premium set out in the option contract.

Who Hedges Forex and is it Worth It?

While only you as a trader can make the decision on whether hedging is worth it, the benefit of engaging one of the strategies mentioned here is that you do limit at least some of your exposure in the markets you are trading. Timed right, it can also put you in a more profitable position.

The question of who hedges in forex is more complex, but generally speaking, as long as the forex broker you are trading with allows hedging, then there is nothing to stop you from doing it. It is important that you understand why you are hedging and how you want the market to react but beyond that, almost all levels of trader can get involved with at least some of the strategies above.

Forex Hedging Fees and Costs

There are no direct fees related to forex hedging, but depending on your broker, you may have to pay a commission or spread on the market you are trading. This, as well as any other fees like a swap-fee if you are keeping the position open, are some other important things to factor into your calculations when determining if you should try hedging in forex.

Spread the love
Continue Reading

Forex

US Unemployment Rate Doubles Causing Forex Market Waves

mm

Published

on

US Unemployment Rate Doubles Causing Forex Market Waves
  • Rate has doubled from Previous Weeks Record
  • Record High is worse than Analysts Predicted
  • EUR/USD Slides Again as Oil the Only Positive

US unemployment rate figures just released make for very grim reading. A hammer blow to start Thursday, the figures show that more than 6.6 million Americans filed for unemployment benefit amid the ongoing COVID-19 crisis. These numbers more than doubled the already unprecedented record of 3.3 million jobless claims from the previous week. The market has been somewhat slow to react to this news, but remains poised for the jobs report to be released later today.

New and Unwanted Records Being Set

Last week’s unemployment numbers of 3.3 million were far beyond the previous record high set in 1982. The number was almost 10 times greater than that set almost 40 years previous. The new weekly number from today puts that even further into the shadows. These are unprecedented times of difficulty throughout the US and global economy which show little sign of let up at present. At the time of writing, the Dow Jones was trading 150 points lower on release of the news which sees more than 10 million people in the US now filing unemployment claims in the past two weeks.

Some solace can be found in the fact that the latest $2 trillion stimulus package has made it easier for workers who have been furloughed in the crisis to remain on unemployment benefit, and also expanded the scope of those who could apply for the benefit. The previous high of 695,000 claims in 1982, and the 665,000 during the previous financial crisis of 2009 now seem miniscule by comparison.

Numbers Outpace Expert Prediction as Euro Falls

Analysts had predicted that numbers would should a marked increase. The results though, have gone far beyond even what the most pessimistic of onlookers imagined. This movement looks set to continue with more labor data to come on Friday. This government data release is set to show more huge losses across the board.

The forex market impact is already being felt as the EUR/USD market fell back below the $1.09 mark. The currency pair had worked hard over the previous week to build back up significantly, but on release of more negative data from the US, it has given way to the continually increasing safe-haven role of the greenback.

Oil Rebound Provides Glimmer of Positivity

At the opening bell, the one positive to garner from the start of the day comes from the news that the price war between Russia and Saudi Arabia may be nearing an end. Prices rallied across the oil markets more than 10% on these hopes. Nothing has been ruled out and there hasn’t been any concrete word besides an offering on Wednesday from US President Trump that the two sides would “work it out” in the coming days. This news would appear to have some truth behind it and has bolstered the market from record low levels.

Forex BrokersReview

US Unemployment Rate Doubles Causing Forex Market Waves
- #1 Broker in USA
- Canadians Welcome
- Over 80 Currencies
- Regulated by NFA, CFTC, FCA, FSA, IIROC & CIMA
- Member of the National Futures Association (NFA# 0339826)

Click Here to Visit Forex.com

US Unemployment Rate Doubles Causing Forex Market Waves
- #1 Broker in UK
- Singapore Welcome
- Australia Welcome
- 12,000 + Global Markets
- Established in 1983
- Authorized & Regulated by the FCA

Click Here to Visit City Index

 

 

Spread the love
Continue Reading

Forex

Asian Forex Market Strengthens as US Virus Cases Soar

mm

Published

on

Asian Forex Market Strengthens as US Virus Cases Soar
  • JPY Posts Steady Gain to Start the Day
  • Other Asian Markets also boosted
  • COVID-19 Cases Increase to Make US Global Leader

Currencies and markets in Asia got Friday trading off to a positive start. Figures coming from Tokyo saw inflation easing to 0.4% for March. This, and the news that US cases of COVID-19 have now surpassed those of China, helped strengthen the JPY which has posted gains of more than 1% on the day against the US Dollar. Both the NZD, and the AUD, often traded as a proxy for the Chinese Yuan also posted increases.

This comes as confidence starts to return to the Chinese market, even though Beijing has now temporarily closed the country to all foreign visitors to prevent the spread of imported virus cases.

USD/JPY Improving From Low Point

Gains from the Japanese Yen against the USD during the Asian trading session on Friday have brought it back from a several week low point. Although the currency still remains under some strong selling pressure, this has been lightened by positive data released from Tokyo, combined with an easing of the USD safe-haven status from what it had been in the previous several days.

The JPY itself is a well-known currency that traders usually move to during times of uncertainty, though this had been rocked in recent weeks with the market turmoil present across Asia and the world. Stimulus hopes though, particularly in Japan, as PM Shinzo Abe prepped a $135 billion package for approval, have managed to thoroughly boost trader confidence. The Nikkei bounced back with a gain of almost 20,000 points Friday to reflect this.

Positive Ripple Felt Across Asia

While Japanese markets posted some of the biggest gains, there were rallies across the region. These extended to Shanghai and Hong Kong both posting positive numbers as the Asian economy looked to regain stability following a torrid period. Analysts are predicting a further push from these markets next week as they look to get ahead of US markets that are currently predicted to open lower after large gains on Wall Street yesterday.

The continuation of this positive trend will likely hinge a lot on news coming from China in the coming days and into next week as it continues to get back to work following the protracted shut down.

US Markets May be Shaken by Increased Case Numbers

With news coming today that the number of US COVID-19 cases has now overtaken that of China, traders wait to see how both the stock, and forex markets will respond. Traders were not deterred by huge unemployment numbers posted yesterday, but experts are predicting a slowdown to end the week with markets projected to open lower.

This comes after a significant rally saw the S&P 500 climb more than 6% yesterday. This could also prompt a further move away from the USD as traders look to other options for safety.

Forex BrokersReview

Asian Forex Market Strengthens as US Virus Cases Soar
- #1 Broker in USA
- Canadians Welcome
- Over 80 Currencies
- Regulated by NFA, CFTC, FCA, FSA, IIROC & CIMA
- Member of the National Futures Association (NFA# 0339826)

Click Here to Visit Forex.com

Asian Forex Market Strengthens as US Virus Cases Soar
- #1 Broker in UK
- Singapore Welcome
- Australia Welcome
- 12,000 + Global Markets
- Established in 1983
- Authorized & Regulated by the FCA

Click Here to Visit City Index

 

Spread the love
Continue Reading

Forex News

Forex Brokers

Forex BrokersReview

- #1 Broker in USA
- Canadians Welcome
- Over 80 Currencies
- Regulated by NFA, CFTC, FCA, FSA, IIROC & CIMA
- Member of the National Futures Association (NFA# 0339826)

Click Here to Visit Forex.com

- #1 Broker in UK
- Singapore Welcome
- Australia Welcome
- 12,000 + Global Markets
- Established in 1983
- Authorized & Regulated by the FCA

Click Here to Visit City Index