The takeaway …I expect the dollar price of the euro to keep falling.
The probability that the EUR/USD will trade above 1.0756 was around .7750 at 8:03 AM EST according to data from NADEX. Expiration for this particular contract is 11 pm EST. The spot price at 8:03 AM, according to NADEX data was 1.07826.
OANDA is reporting a spot price of 1.07862 as of 8:20 AM. OANDA data shows that the EUR/USD has fallen by 2.2% since Monday. Right now, based on the charts, I don’t see a reverse in this trend today.
I expect, based on a standard futures calculation formula, that the EUR/USD will be around 1.07826 by 11 pm this evening.
The Board of Governors of the Federal Reserve System’s Federal Open Market Committee has its next monetary policy meeting on 13-14 June 2023. Whether the Fed continues to raise rates will depend on its take on the unemployment number, wage growth, and personal consumption expenditures. The Fed has expressed that it will need to see the unemployment rate increase as part of its efforts to rein in inflation.
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Looming in the background is the negative impact a slowed down economy will have on the Biden Administration and to a lesser extent the incumbents in the Congress. As the Biden Administration and the Congress negotiate the debt ceiling, there is the threat that fiscal policy in the form of higher taxes may be offered up as a way to shore up lacking tax revenue. This will also put a crimp on household and business spending.
Alton Drew
24 May 2023
Today’s definition: interbank market.
“The interbank market is a global network utilized by financial institutions to trade currencies and other currency derivatives directly between themselves. While some interbank trading is done by banks on behalf of large customers, most interbank trading is proprietary, meaning that it takes place on behalf of the banks’ own accounts. Banks use the interbank market to manage their own exchange rate and interest rate risk as well as to take speculative positions based on research.
The interbank market is a subset of the interdealer market, which is an over-the-counter (OTC) venue where financial institutions can trade a variety of asset classes among one another and on behalf of their clients, often facilitated by interdealer brokers (IDBs).” — Investopedia.
The stats …
30-Day Federal Funds Options/Futures: 94.86
Source: CME Group.
Effective Federal Funds Rate: 5.08%
Discount Window: 5.25%
Interest on Reserve Balances: 5.15%
Source: Board of Governors-Federal Reserve System.
DXY: 103.47
Source: MarketWatch.
https://traderswithedge.com/?r=348
Disclaimer: The data and output from this blog post does not constitute investment or legal advice and is not a personal recommendation from Alton Drew. Nothing contained herein constitutes the solicitation of the purchase or sale of any futures or options. Any investment activities undertaken will be at the sole risk of the reader. Alton Drew expressly disclaims all liability for the use or interpretation (whether by visitor or by others) of information contained herein. Decisions based on this information are the sole responsibility of the reader. Any visitor to this page agrees to hold Alton Drew harmless against any claims for damages arising from any decisions that the visitor makes based on such information.
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