The other face of trading - Guest Editorial - FinanceFeeds

The other face of trading – Guest Editorial

Ramy Abouzaid

Market Analyst Ramy Abouzaid looks at how the daily economic conditions that face two people, one in Argentina and one in Turkey, can affect the FX market’s exotic currency pairs

By Ramy Abouzaid, Head of Research, ATFX, UAE

While you are sitting in front of the trading screens and prices are moving fast and fluctuating, looking at the US Dollar Index, the reflection of movements of yield rates on US bonds at the time (chart added below), your focus as a trader is on making the largest amount of money from these signals and analysis.  However, take a brief moment to digest the following:

Federico, a 10-year-old boy, lives with his mother in Buenos Aires and while he wakes up in the morning to get ready to go to school, his mother tells him he will not go today as she can no longer afford to attend school.  At the same time, 30-year-old Malika lives in Istanbul. She has just received a letter from her company telling her that she has been made redundant and has just become unemployed. The company justified this because of rising business costs and lower profits margins.

Do you imagine that the numbers moving in front of you on the trading screen can impact the lives of other people, be they near you or thousands of miles away?

The rise in the US dollar – especially with rising yields on US bonds – has affected financing costs in emerging economies. These economies are clearly suffering. Let’s take two obvious examples: Argentina, whose currency has lost about 25% of its value over the past few weeks, with the central bank raising interest rates to 40% to stop this bleeding.

Source: historical prices from Investing.com

This led to massive inflation in Argentina, reaching more than 25% on an annualized basis, which is devastating for limited and fixed income. If we look at Turkey, which is also suffering from a continuous decline in the price of its currency against the dollar, the dollar has reached a new historical high against the Turkish lira.  Inflation has also risen and approached 11% on an annualized basis. With these successive rises in the US dollar and with the continued rise in US bond yields, this is reflected in the daily lives of people, which rarely get our attention. Only as numbers and with all this, we still have the opportunity as traders to translate those stories into profitable results.

Source: Instituto Nacional de Estadística y Censos | Turkish Statistical Institute

 

The subject matter and the content of this article are solely the views of the author. FinanceFeeds does not bear any legal responsibility for the content of this article and they do not reflect the viewpoint of FinanceFeeds or its editorial staff.

Read this next

Industry News

BlackRock opens up to Bitcoin investment

The two eligible funds are no lightweights and they contain more than $40.0 billion of assets between them

Industry News

Citi launches a new suite of futures trading algos

Implementation shortfall algorithms are designed to keep or reduce that cost differential (slippage) to a minimum

Inside View

FX brokers are beginning to not just talk about becoming their own ECN or exchange, they are doing it!

FX brokers who do capitalize on the importance of offering a full range of venue-listed products via genuine live market liquidity will be left behind. The b-book OTC world has limited future, and the companies at the top are already working on its replacement. Here is our full analysis

Industry News

China spent a year purging itself of global FX brokers. Now it is about to unleash its own monster

Saxo Bank and eToro knew what they were doing when they sold out to Chinese firms. We look at how the government purged the FX businesses for its own greed and own ends. Now may be the time to consider how to structure a Chinese FX company.

Industry News

The journey towards a consolidated European tape

The chair of ESMA, Steven Maijoor, has bemoaned the lack of such resources., famously saying in the past that: “After nearly 2 years of operating under MiFID II, we’re still lacking a reliable view of liquidity across the EU”

Industry News

Fund managers push back over the FCA clampdown on cryptocurrencies

Assets under management in these types of investments have risen 5 fold over the last 12 months to stand at around €2.30 billion today

Industry News

IG Group impresses with bumper interim figures and plans for a tastytrade in the USA

Not only did turnover increase substantially at IG Group, profitability did as well, and the business made £231.30 million in the first 6 months of the financial year

Industry News

Genesis launches FX Prime Trade Capture application in partnership with Brazilian broker-dealer XP Investimentos

FX Prime also acts as a productivity tool that captures FX & Rates voice business and streams trade activity directly into the Prime Broker while simultaneously serving as placeholder for books and records.

Inside View

Want to get your electronic brokerage business right in Australia? This is how

Now is the time to take heed of the brokers that are doing things the right way in Australia. Here is a full and open discussion with a company that is leading the way.