Before the instability that can be generated in the equity markets in this first half of the year, that of currencies can be formed as an alternative to investment by small and medium investors. In this regard, it must be remembered that the recent Ebury report shows that “it is remarkable that the performance of the dollar was mixed against the main currencies of emerging markets, many of which performed much better than the returns of USA, as fears affecting the world economy diminish ”.
Operations in the currency markets are more complex because they are faster. They are financial assets that they vary their price constantly. With great agility that enables large capital gains to be obtained in a few hours. Although for the same reason, it carries a greater risk in its movements and requires greater learning by small and medium investors. Where one of the keys to make the investment is to detect changes in currencies. As for example, between the dollar and the euro.
One of the most relevant aspects in this investment is the derivative of the currency exchange that requires more demanding commissions than in other financial products. For this reason, it is necessary to be very clear about the moment of entry and exit in the currency markets. Not surprisingly, the cost of these operations can be almost double that of other financial assets, such as buying and selling shares on the stock market. Through a market characterized by its great flexibility and volatility. With wide differences between their maximum and minimum prices.
Currency: the euro at the center
The announcement that Christiane Lagarde will be the new president of the ECB was interpreted as news of continuity and, perhaps, of moderation in monetary policy, the Ebury report points out. Where it becomes clear that the markets certainly saw it this way, as Italian bonds rallied strongly and the euro began to lose ground even before the US payroll report released on Friday.
In Ebury's view, moreover, the EU's decision not to apply sanctions against Italy for its budget deficit signals a more tolerant view of additional fiscal stimulus. This means that, according to Ebury, additional monetary easing may be less necessary, which is positive for the euro in the medium term. In any case, everything seems to indicate that this currency will be one of the most active within this important financial asset. Where it is only possible to clarify which is the change on which the operations are going to be carried out: dollar, Swiss franc, Japanese yen, etc.
Positive news on the dollar
Last week's positive news on the trade front was overshadowed on Friday by a very strong payroll report in the United States, according to the Ebury study. Where job creation is found to have recovered strongly since its fall in the autumn of last year, real wages continue to grow modestly but steadily. There is no indication that there is a recession or even a significant slowdown. After the report, markets appeared to rule out any possibility of a further 50 basis point cut at this spring's meeting. Federal Reserve. While we think that a cut is politically unavoidable, we do not see the conditions for a sustained cut cycle.
One of the keys by which this international currency will be directed is the decision that the monetary authority in the United States (FED) may make. In the sense of whether or not it will raise interest rates in this economic area and that will also be decisive for the evolution of international equity markets. Where, depending on the decision made, you can go one way or the other. It cannot be forgotten that the US dollar is one of the currencies in where more positions are opened by small and medium investors. With a trading volume that is very high and above the rest of the currencies.
The pending Brexit pound
The pound sterling is another of the most active currencies in the international market. In this regard, the recent Ebury report highlights growing signs that Brexit uncertainty is beginning to affect UK business confidence. PMI business activity indicators fell below the 50 level, indicating contraction. This week we will see if this loss of confidence is reflected in the real economic data when the GDP growth for the last three months of last year.
Right now, it can be said without mistake that it is one of the most volatile currencies. With very wide differences in their maximum and minimum prices that allow to carry out the trading operations. In particular, due to the movements derived from the exit of Great Britain from the European Union. As a consequence of this, it is quite true that savings can be made profitable if they know how to adjust the entry and exit of their positions in the foreign exchange market. Especially with its changes with the euro and the US dollar.
While on the other hand, it cannot be forgotten that the general trend in recent weeks is a clear rebound in the dollar and that it may give the odd clue for the decisions of small and medium investors. Although in very short-time operations, which is the period of permanence to which these operations are directed. In any case, it is one of the alternatives that retail investors have so that they can make their savings profitable in the second tranche of the year. Beyond another series of technical considerations that can influence the evolution of these important financial assets.