Category: FX

Following up on the successful gamble on USDJPY after the FOMC announcement I had a successful position by shorting EURNOK ahead of the Norwegian interest rate decision today (up 25bp:s to 5.25 pct). BUT... and here is what annoys me at the moment... As I was at work today I had a profit taking limit in place and NOK strengthened far more than it accounted for... so I actually had higher opportunity costs than the profit taken.. In such a way that it would've been a financial advantage to just stay home today... gives some thoughts 🙂

The thing is, taking profit can be rather important, looking at the USDJPY position I hold yesterday, if I had stayed in for as long as today I would've ended up loosing money, as USD appreciated quite a bit against JPY. At least I can use that as a slight comfort.

Well.. there are other chances. All in all I'm looking forwards to having some days off around christmas and finally get to read some non-school and non-work related information. There has been far too many news articles about work the past month (8,000-10,000 articles in total... gotta "love" it when Subprime troubles hits Norway) so will be nice to get the thoughts away for a while, although I don't start my vacation untill the 22nd.

The Federal Open Market Committee / Federal Reserve decided as expected to reduced the key interest rate in the US by 25bp to 4.25.. In anticipation of this I shorted USDJPY right before the meeting and as shown by the chart below successfully so:

FED 1: The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 4-1/4 percent. Incoming information suggests that economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks.
7:34 PM
FED 2: Today’s action, combined with the policy actions taken earlier, should help promote moderate growth over time. Readings on core inflation have improved modestly this year, but elevated energy and commodity prices, among other factors, may put upward pressure on inflation.
FED 3: In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully. Recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic growth and inflation.
7:35 PM
FED 4: The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth
FED 5: Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; William Poole; and Kevin M. Warsh. Voting against was Eric S. Rosengren, who preferred to lower the target for the federal funds rate by 50 basis points at this meeting.
7:36 PM
FED 6: In a related action, the Board of Governors unanimously approved a 25-basis-point decrease in the discount rate to 4-3/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, and St. Louis.

I had a nice pickup on the EURUSD right before closing of US equity markets. Grabbing 12 pips profit on a two hour short position. I must admit it was rather interesting at first, and my timing is obviously still off as I should've waited another half an hour before going into the position, but at least my intuition turned correct and I got myself out of it at the right time.

Now the sterling can hopefully do its job too, after the USD did.