$3.98 trillion daily global turnover

The $3.98 trillion daily global turnover, trading in London accounted for around $1.36 trillion, or 34.1% of the total, making London by far the global center for foreign exchange. In second and third places respectively, trading in New York accounted for 16.6%, and Tokyo accounted for 6.0%. In addition to "traditional" turnover, $2.1 trillion was traded in derivatives.

Exchange-traded FX futures contracts were introduced in 1972 at the Chicago Mercantile Exchange and are actively traded relative to most other futures contracts.

Several other developed countries also permit the trading of FX derivative products (like currency futures and options on currency futures) on their exchanges. All these developed countries already have fully convertible capital accounts. Most emerging countries do not permit FX derivative products on their exchanges in view of prevalent controls on the capital accounts. However, a few select emerging countries (e.g., Korea, South Africa, India) have already successfully experimented with the currency futures exchanges, despite having some controls on the capital account.

FX futures volume has grown rapidly in recent years, and accounts for about 7% of the total foreign exchange market volume, according to The Wall Street Journal Europe (5/5/06, p. 20).

Foreign exchange trading increased by 38% between April 2005 and April 2006 and has more than doubled since 2001. This is largely due to the growing importance of foreign exchange as an asset class and an increase in fund management assets, particularly of hedge funds and pension funds. The diverse selection of execution venues have made it easier for retail traders to trade in the foreign exchange market. In 2006, retail traders constituted over 2% of the whole FX market volumes with an average daily trade volume of over US$50-60 billion (see retail trading platforms). Because foreign exchange is an OTC market where brokers/dealers negotiate directly with one another, there is no central exchange or clearing house. The biggest geographic trading centre is the UK, primarily London, which according to IFSL estimates has increased its share of global turnover in traditional transactions from 31.3% in April 2004 to 34.1% in April 2007. The ten most active traders account for almost 80% of trading volume, according to the 2008 Euromoney FX survey. These large international banks continually provide the market with both bid (buy) and ask (sell) prices. The bid/ask spread is the difference between the price at which a bank or market maker will sell ("ask", or "offer") and the price at which a market-maker will buy ("bid") from a wholesale customer. This spread is minimal for actively traded pairs of currencies, usually 0–3 pips. For example, the bid/ask quote of EUR/USD might be 1.2200/1.2203 on a retail broker. Minimum trading size for most deals is usually 100,000 units of base currency, which is a standard "lot".

These spreads might not apply to retail customers at banks, which will routinely mark up the difference to say 1.2100/1.2300 for transfers, or say 1.2000/1.2400 for banknotes or travelers' checks. Spot prices at market makers vary, but on EUR/USD are usually no more than 3 pips wide (i.e., 0.0003). Competition is greatly increased with larger transactions, and pip spreads shrink on the major pairs to as little as 1 to 2 pips.

Important Report of Forex

Summary Outlook: On Friday, October 3rd, at 0830ET/1230GMT, US September employment data will be released. We expect the headline NFP number will come in roughly in line with consensus forecasts of -105K, but think the unemployment rate may edge up to 6.2/6.3% versus market expectations of a steady 6.1% unemployment rate. The risk is that the headline NFP shows a larger drop in jobs, potentially owing to strike- or hurricane-related adjustments. Summary Outlook: On Friday, October 3rd, at 0830ET/1230GMT, US September employment data will be released. We expect the headline NFP number will come in roughly in line with consensus forecasts of -105K, but think the unemployment rate may edge up to 6.2/6.3% versus market expectations of a steady 6.1% unemployment rate. The risk is that the headline NFP shows a larger drop in jobs, potentially owing to strike- or hurricane-related adjustments. Interim economic data (weekly claims, labor differential in Consumer confidence report, ISM manufacturing employment dropping from 49.7 to 41.8) have shown a deterioration in overall labor market conditions, so the risks are clearly skewed to a weaker NFP. We would not be surprised by a NFP job loss of -150/-170K. And be alert for a negative revision to August NFP. But the NFP report is not the only show in town tomorrow, as markets will anxiously be watching to see if the US House can pass the financial sector rescue package. We are highly optimistic that additions to the Senate-passed bill will lead to the bill's passage, and we think this will be greeted enthusiastically by investors. The result could be a significant rally in stocks and a rush to riskier assets, which in FX means buying of JPY-crosses (e.g. EUR/JPY or AUD/JPY). The rescue package may also alleviate credit market strains, reducing demand for USD from bank funding needs. Trading Strategy: Because we think the risks are skewed to a weaker NFP reading, we anticipate an initially negative USD reaction. But we think USD strength this week is likely to see heavy buying of USD on such weakness, leading to a short-term reversal of the initial reaction. From then, we look for JPY-cross buying to materialize based on the prospect of House passage of the rescue bill. If correct, such buying should put a floor under non-JPY dollar pairs, like EUR/USD and GBP/USD. The rest of the session could then see a grind higher in the JPY-crosses, sending EUR/USD, GBP/USD and AUD/USD higher on the day, aided by week-end short-covering in EUR/USD/profit-taking on long USD positions. In concrete terms, a NFP reading of between -100K/-150K could see EUR/USD jump higher by 60-90 pips from pre-release levels, followed by heavy selling then sending the pair down 100-120 pips from its post-NFP reaction high. From there, we then expect that short-covering and outright buying of EUR/JPY will see EUR/USD grind higher. We will be closely watching a long-term trend line that guided the EUR higher since early 2002, currently at 1.3910/30 area. We would stop out (exit) of long EUR/USD positions if it trades below 1.3710/20, roughly 30 points below today's low. We think a short-squeeze higher in EUR/USD is likely on strength over 1.3950/60. Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions. Interim economic data (weekly claims, labor differential in Consumer confidence report, ISM manufacturing employment dropping from 49.7 to 41.8) have shown a deterioration in overall labor market conditions, so the risks are clearly skewed to a weaker NFP. We would not be surprised by a NFP job loss of -150/-170K. And be alert for a negative revision to August NFP. But the NFP report is not the only show in town tomorrow, as markets will anxiously be watching to see if the US House can pass the financial sector rescue package. We are highly optimistic that additions to the Senate-passed bill will lead to the bill's passage, and we think this will be greeted enthusiastically by investors. The result could be a significant rally in stocks and a rush to riskier assets, which in FX means buying of JPY-crosses (e.g. EUR/JPY or AUD/JPY). The rescue package may also alleviate credit market strains, reducing demand for USD from bank funding needs. Trading Strategy: Because we think the risks are skewed to a weaker NFP reading, we anticipate an initially negative USD reaction. But we think USD strength this week is likely to see heavy buying of USD on such weakness, leading to a short-term reversal of the initial reaction. From then, we look for JPY-cross buying to materialize based on the prospect of House passage of the rescue bill. If correct, such buying should put a floor under non-JPY dollar pairs, like EUR/USD and GBP/USD. The rest of the session could then see a grind higher in the JPY-crosses, sending EUR/USD, GBP/USD and AUD/USD higher on the day, aided by week-end short-covering in EUR/USD/profit-taking on long USD positions. In concrete terms, a NFP reading of between -100K/-150K could see EUR/USD jump higher by 60-90 pips from pre-release levels, followed by heavy selling then sending the pair down 100-120 pips from its post-NFP reaction high. From there, we then expect that short-covering and outright buying of EUR/JPY will see EUR/USD grind higher. We will be closely watching a long-term trend line that guided the EUR higher since early 2002, currently at 1.3910/30 area. We would stop out (exit) of long EUR/USD positions if it trades below 1.3710/20, roughly 30 points below today's low. We think a short-squeeze higher in EUR/USD is likely on strength over 1.3950/60. Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

forex marketing

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Forex in the world

The Fed's Beige Book, which offers a wealth of anecdotal evidence as to the health of the US economy, is due up tomorrow (June 11th) at 14:00ET. This could be a significant turning point for the US dollar that will either confirm and extend its recent gains, or lead to a significant pullback for the Greenback. We believe the four main categories to focus on in the report are the labor market, consumer spending, inflation and lending standards. Given the sharp move up in the unemployment rate and the fact that the US has failed to register even one positive nonfarm payrolls number this year, the Beige Book's labor market assessment will be key. In the April Beige Book, labor markets were described as mostly weakening. We expect something to this effect is priced in for tomorrow's release as well given the moribund employment data of late. The upside to USD could come from an assessment that the labor market is stabilizing, albeit at a low level of activity. The market will also be eager to gauge the impact to consumer spending from the government stimulus checks which began to hit mailboxes in late April/early May. In the last Beige Book, consumer spending activity was noted as slowing across most of the United States. While the latest chainstore sales numbers suggest some pickup in recent retail activity, if it is noted that the stimulus has had little broad impact on spending we will likely see US economic prospects weaken and a lower US dollar. On the inflation front, the market is looking for confirmation that inflation pressures continue to rear their ugly head. Given the steadfast increase in commodity prices and surging inflation expectations, we expect the assessment to be quite hawkish. This will help keep US yields elevated and add further support to the USD, with USD/JPY especially sensitive to higher interest rates of late. The fourth area of focus is likely to be on the lending side. The credit turmoil has been noted as ongoing by Fed officials and the market likely expects a similar assessment to what we witnessed in the last Beige Book when lending standards were said to have tightened (making it harder for the average person to get a loan approved). An indication that lending standards have eased will likely fuel speculation that the credit crisis is approaching it nadir and help boost the USD. In sum, if the good news on these key economic indicators outweighs the bad we can expect EUR/USD to retest 1.5400 and USD/JPY to come near the 108.00 level. In such a case, the report will validate recent comments from Fed Chairman Bernanke that the economic situation has improved somewhat while rising inflation remains a big risk. However, if the labor situation and consumer spending are downgraded significantly, this will outweigh higher inflation or an improvement in lending activity and likely take the Greenback lower towards EUR/USD 1.5600 and USD/JPY near 106.50. Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

US economy

The Fed's Beige Book, which offers a wealth of anecdotal evidence as to the health of the US economy, is due up tomorrow (June 11th) at 14:00ET. This could be a significant turning point for the US dollar that will either confirm and extend its recent gains, or lead to a significant pullback for the Greenback. We believe the four main categories to focus on in the report are the labor market, consumer spending, inflation and lending standards. Given the sharp move up in the unemployment rate and the fact that the US has failed to register even one positive nonfarm payrolls number this year, the Beige Book's labor market assessment will be key. In the April Beige Book, labor markets were described as mostly weakening. We expect something to this effect is priced in for tomorrow's release as well given the moribund employment data of late. The upside to USD could come from an assessment that the labor market is stabilizing, albeit at a low level of activity. The market will also be eager to gauge the impact to consumer spending from the government stimulus checks which began to hit mailboxes in late April/early May. In the last Beige Book, consumer spending activity was noted as slowing across most of the United States. While the latest chainstore sales numbers suggest some pickup in recent retail activity, if it is noted that the stimulus has had little broad impact on spending we will likely see US economic prospects weaken and a lower US dollar. On the inflation front, the market is looking for confirmation that inflation pressures continue to rear their ugly head. Given the steadfast increase in commodity prices and surging inflation expectations, we expect the assessment to be quite hawkish. This will help keep US yields elevated and add further support to the USD, with USD/JPY especially sensitive to higher interest rates of late. The fourth area of focus is likely to be on the lending side. The credit turmoil has been noted as ongoing by Fed officials and the market likely expects a similar assessment to what we witnessed in the last Beige Book when lending standards were said to have tightened (making it harder for the average person to get a loan approved). An indication that lending standards have eased will likely fuel speculation that the credit crisis is approaching it nadir and help boost the USD. In sum, if the good news on these key economic indicators outweighs the bad we can expect EUR/USD to retest 1.5400 and USD/JPY to come near the 108.00 level. In such a case, the report will validate recent comments from Fed Chairman Bernanke that the economic situation has improved somewhat while rising inflation remains a big risk. However, if the labor situation and consumer spending are downgraded significantly, this will outweigh higher inflation or an improvement in lending activity and likely take the Greenback lower towards EUR/USD 1.5600 and USD/JPY near 106.50. Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.