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novice · 19-01-2004, 00:38

neil4X

I think with interest rates it is important to look at the real interest rates i.e.

real interest rates = nominal interest rates - inflation

There a plenty of developing nations with high interest rates but they also have high or higher inflation rates. Thus negating any exchange rate advantage.

Nominal interest rates are well known and easy to find.

http://www.fxstreet.com/nou/continguts/centralbanks.asp

How to measure inflation? I don't think the CPI or related measures really give a good measure. Do any American's believe that the cost of their life are only increasing as fast as the CPI numbers? Maybe a better measure would be to look at the increase in money supply. M1 money I feel would be the best measure not M3 etc.

M1 money basically notes and coins in circulation + cash deposits
M3 money basically M1 + loans and other form of credit

Due to fractional reserve banking M3 is going to be much larger than M1.

Stringmine

I feel that the USD was technically oversold. The comments by the ECB and the trade balnce data were just the catalyst for a technical correction not the cause IMHO.

Longer term the USD still looks like a sell both technically and fundamentally IMHO.

eternalfuture

I would agree that the markets price in advance (to a large extent) expected news and thus unexpected news will have a greater effect.

But I feel that it is more useful to look at news in light of current market setiment. For example if the market setiment is bullish the market may well react to bullish news. But if market setiment is bullish it may well largely ignore bearish news.

This quote sums it up much better than I could:

http://www.gold-eagle.com/gold_digest_04/hamilton010404.html

(Chapter VI) … “The bull forces were at work, and the public never is independently responsive to news. You see that all the time. If there is a solid bull foundation, for instance, whether or not what the papers call bull manipulation is going on at the same time, certain news items fail to have the effect they would have if the Street was bearish. It is all in the state of sentiment at the time.”

Boy, if this was true in Jesse Livermore’s day, imagine how much more so it is today in the frenetic Information Age! News alone is not all that important, it is only when news is filtered through the currently prevailing sentiment that it will have a material impact on the markets. If sentiment is bullish then bad news is ignored, and if sentiment is bearish then good news is disregarded. Sentiment is king for short-term trading!

19-01-2004, 00:38	#5
novice Super Moderator Join Date: Oct 2003 Posts: 1,222 Downloads: 0 Uploads: 0 Rep Power: 0	neil4X I think with interest rates it is important to look at the real interest rates i.e. real interest rates = nominal interest rates - inflation There a plenty of developing nations with high interest rates but they also have high or higher inflation rates. Thus negating any exchange rate advantage. Nominal interest rates are well known and easy to find. http://www.fxstreet.com/nou/continguts/centralbanks.asp How to measure inflation? I don't think the CPI or related measures really give a good measure. Do any American's believe that the cost of their life are only increasing as fast as the CPI numbers? Maybe a better measure would be to look at the increase in money supply. M1 money I feel would be the best measure not M3 etc. M1 money basically notes and coins in circulation + cash deposits M3 money basically M1 + loans and other form of credit Due to fractional reserve banking M3 is going to be much larger than M1. Stringmine I feel that the USD was technically oversold. The comments by the ECB and the trade balnce data were just the catalyst for a technical correction not the cause IMHO. Longer term the USD still looks like a sell both technically and fundamentally IMHO. eternalfuture I would agree that the markets price in advance (to a large extent) expected news and thus unexpected news will have a greater effect. But I feel that it is more useful to look at news in light of current market setiment. For example if the market setiment is bullish the market may well react to bullish news. But if market setiment is bullish it may well largely ignore bearish news. This quote sums it up much better than I could: http://www.gold-eagle.com/gold_digest_04/hamilton010404.html (Chapter VI) … “The bull forces were at work, and the public never is independently responsive to news. You see that all the time. If there is a solid bull foundation, for instance, whether or not what the papers call bull manipulation is going on at the same time, certain news items fail to have the effect they would have if the Street was bearish. It is all in the state of sentiment at the time.” Boy, if this was true in Jesse Livermore’s day, imagine how much more so it is today in the frenetic Information Age! News alone is not all that important, it is only when news is filtered through the currently prevailing sentiment that it will have a material impact on the markets. If sentiment is bullish then bad news is ignored, and if sentiment is bearish then good news is disregarded. Sentiment is king for short-term trading!