Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

MadMarketScientist

Has High Frequency Trading Ruined The Stock Market For The Rest Of Us?

Recommended Posts

If you are an investor, high-frequency trading (HFT) is a part of your life even if you don't know it. You have likely purchased shares offered by a computer or sold shares purchased and then instantly sold by another computer. HFT is controversial. Traders disagree with each other and studies contradict other studies, but regardless of the opinions, what is most important is how HFT affects your money.

 

What Is HFT?

HFT is a broader term for various trading strategies that involve buying and selling financial products at extremely high speeds. Computers can identify market patterns and buy or sell these products in a matter of milliseconds based on algorithms or "algos."

 

One strategy is to serve as a market maker where the HFT firm provides products on both the buy and sell sides. By purchasing at the bid price and selling at the ask price, high-frequency traders can make profits of a penny or less per share. This translates to big profits when multiplied over millions of shares.

 

 

Does It Hurt the Market?

One would think that because most trading leaves a computerized paper trail, it would be easy to look at the practices of high-frequency traders to provide a clear-cut answer to this question but that is not true. Because of the volume of data and the firms' desire to keep their trading activities secret, piecing together a normal trading day is quite difficult for regulators. Those who debate this issue often look at the "flash crash."

 

On May 6, 2010, the Dow Jones Industrial Average mysteriously plummeted 10% in minutes, and just as inexplicably, rebounded. Some large blue chip stocks briefly traded at one penny. On Oct. 1, 2010, the Securities and Exchange Commission (SEC) issued a report blaming one very large trade in the S&P e-mini future contracts, which set off a cascading effect among high-frequency traders. As one algo sold rapidly, it triggered another. As more sell stops hit, not only were high-frequency traders driving the market lower, everybody, all the way down to the smallest retail trader, was selling. The "flash crash" was a financial snowball effect.

 

This incident caused the SEC to adopt changes that included placing circuit breakers on products when they fall past a certain level in a short period. In the wake of the flash crash, many asked whether imposing tighter regulation on high-frequency traders made sense, especially since smaller, less visible flash crashes happen throughout the market with regularity.

 

Does It Hurt the Retail Investor?

What is important to most of the investing public is how HFT affects the retail investor. This is the person whose retirement savings are in the market, or the person who invests in the market in order to gain better returns than the near non-existent interest that comes from a savings account. A recent study shed some light on this question.

 

According to The New York Times, a top government economist found that HFT firms are taking significant profits from what they call traditional investors, or those who are not using computer algorithms.

 

Studying the S&P 500 e-mini contracts, researchers found that high-frequency traders made an average profit of $1.92 for every contract traded with large institutional investors and an average of $3.49 when they traded with retail investors. This allowed the most aggressive high-speed trader to make an average daily profit of $45,267 according to the 2010 data. The paper concluded that these profits were at the expense of other traders and this may cause traders to leave the futures market.

 

Although the authors did not study the equity markets where high-frequency traders account for a large amount of stock trading volume - possibly 70% or more, according to some reports - they say it is likely that they would reach the same conclusions.

 

The Bottom Line

The overall sentiment that the small investor cannot win in this market is beginning to proliferate. Some blame the massive amount of uninvested cash as proof that many have given up and lost confidence in the markets. This has become such a problem that even high-frequency traders are looking to other world markets to find the liquidity they need to conduct operations. Regulators around the world are looking at ways to restore consumer confidence in the stock market. Some have proposed a per share trading tax while others, such as Canada, have increased the fees charged to HFT firms.

 

Because of the relative newness of HFT, the process of regulation has come slowly, but one thing that does appear to be true is that HFT is not helping the small trader.

 

http://www.investopedia.com/financial-edge/0113/has-high-frequency-trading-ruined-the-stock-market-for-the-rest-of-us.aspx

Share this post


Link to post
Share on other sites

Why are regulators even allowing HFT ? HFT could destroy not only stock markets but the ideologies of corporate financing in near future if it stays like this...

Share this post


Link to post
Share on other sites

Nice blog... lot of new information for me! But I don't trade stocks. The author writes:

 

Futures market microstructure should be the model and standard for reforming our equities markets.

 

I see 2 great concerns for HFT. One is that the HFT trading is speeding up the market making it more risky for traders and the second is that HFT is taking away normal liquidity which is another form of risk. Important to note that HFT should be defined as trading strategies that require and take advantage of speed advantages requiring co-location and unavailable to other traders and that it doesn't include day traders, scalpers, or other technical traders.

 

It does seem that equities have been hardest hit by HFT and that equities proprietary traders are the hardest hit followed by retail day traders. I would add its not just HFT but also dark pools and all manner of shenanigans that compromise the NBBBO pricing mechanism.

 

Curtis

-

Home - OrderFlowDashPro

Edited by Predictor

Share this post


Link to post
Share on other sites
hell no it doesn't ruin trading. bring on the hft's.. the more... the better.

 

Amen.

 

The net effect of ultra-HFT is greater liquidity and more stable prices. The flash crash did not come from normal HFT but from "rogue code" and is but one instance.

 

My guess is that the loudest complaints come from those that were never really profitable anyway and have never really taken responsibility for the downs in their life.

 

A favorite quote of mine is:

 

"Success in the markets is not about instinct, divine inspiration or spontaneous intellectual combustion. It is about intelligent data processing, sound method and the management of risk and resource that is both effective and adaptive to change."

 

HFT is a fact of life and trading - if you can't deal with it other than to blame it for your own weaknesses - then you are in the wrong game.

 

UB

Share this post


Link to post
Share on other sites

Whether the blame lies on HFT or other factors that led to a mistrust of the market I cannot say, but the market is definitely void of the retail traders it once had.

 

A 55 Tick chart on the TF used to be a fast moving chart, you can set it to 15 ticks now and it still wont be as fast as the 55 once was.

 

And you know that the difference is caused by a huge decrease in the number of small or "retail" traders trading the market.

Share this post


Link to post
Share on other sites

I've been trading futures for 30 years. Anyone who thinks that HFT has not negatively affected the trading environment is a fool. When I was in the pit people would blame order fillers for reducing order flow to traders, turns out this was true imagine knowing where all the orders lie in the market and being able to place your own personal orders ahead of those orders. Dual trading was eventually outlawed.

Order fillers found a way around this problem by creating a friend on the top step of each pit that they could trade with during the day and gave peference to above all other traders. Although every honest trader in the pit knew that this was taking place there was very little that we could do about it, occasionally the exchange would find collusion and issue fines. Once again true free market activity was inhibited by the actions of the few. HFT is worse than top step trading and order filler trading combined. The profits of the many have now been reduced to the pockets of the few. Competing in this arena requires anywhere from 1 million to 100 million in infrastructure, if that doesn't say this market is unfair I don't know what does. Sure there are some prop firm traders that are being allowed to trade enormous size with very little of their own money being put at risk but for those of us that use our own money to trade , competing in this environment is very difficult if not impossible.

Share this post


Link to post
Share on other sites
competing in this environment is very difficult if not impossible.

 

Hi Sunshinejim,

 

It's great to have seasoned traders with experience on the floor of an exchange contibuting here - I hope you'll find the time to contribute to TL often.

 

Given your thoughts above, and the fact that you continue to trade, where do you feel that the possible advantage now lies for retail traders without vast amounts of capital and Aurora rackspace?

 

Regards,

 

BlueHorseshoe

Share this post


Link to post
Share on other sites

And you know that the difference is caused by a huge decrease in the number of small or "retail" traders trading the market.

 

I'm not so sure about that - I believe "retail" accounts for, at best, a fraction of trading volume, and always has done.

 

If you can identify that there is a difference, why cant you define it and adapt to profit from it?

 

BlueHorseshoe

Share this post


Link to post
Share on other sites
I just happened to stumble upon this thread. I am actually writing a paper about this right now in a class for my Masters program.

 

I'm probably stating the bleeding obvious here, but have you read 'Dark Pools'?

 

One of the issues is that HFT is an umbrella term, and the only thing that all such operations have in common is the frequency with which they trade. Some use traditional strategies such as stat arb but at lightning speeds, where others exploit new loopholes that are only available with the advantage of speed (and often strong relationships with the exchange), relating to latency, server jamming, and gaming the order book.

 

There's another good book written by someone who worked at Citadel setting up the HFT infrastructure, but I can't remember the title or author - I'll try and post this tomorrow for you.

 

BlueHorseshoe

Share this post


Link to post
Share on other sites

Pre hft leaves basically the same footprints and chart patterns...etc as present day htf. It might affect if you are scalping 1 to 3 ticks but is does not affect swing trading very much... if any.....if you know how to pick only trades that have a 40% to 60% probability. At least i haven't found much difference but then i could a tad bit off of my rocker....,:haha: most people think i am.. I could care less:cool:

Share this post


Link to post
Share on other sites
Whether the blame lies on HFT or other factors that led to a mistrust of the market I cannot say, but the market is definitely void of the retail traders it once had.

 

A 55 Tick chart on the TF used to be a fast moving chart, you can set it to 15 ticks now and it still wont be as fast as the 55 once was.

 

And you know that the difference is caused by a huge decrease in the number of small or "retail" traders trading the market.

most got there ass burn't between 2007 and 2011 and are onthe back porch licking their wounds.

Share this post


Link to post
Share on other sites
I'm probably stating the bleeding obvious here, but have you read 'Dark Pools'?

 

One of the issues is that HFT is an umbrella term, and the only thing that all such operations have in common is the frequency with which they trade. Some use traditional strategies such as stat arb but at lightning speeds, where others exploit new loopholes that are only available with the advantage of speed (and often strong relationships with the exchange), relating to latency, server jamming, and gaming the order book.

 

There's another good book written by someone who worked at Citadel setting up the HFT infrastructure, but I can't remember the title or author - I'll try and post this tomorrow for you.

 

BlueHorseshoe

 

Actually Yes! and it was because of a posting that I saw you made last week. It was very ironic .......I am about halfway through it and it is a great book. If you remember the name of that other book let me know.

 

Thanks ! :)

Share this post


Link to post
Share on other sites
I'm not so sure about that - I believe "retail" accounts for, at best, a fraction of trading volume, and always has done.

 

If you can identify that there is a difference, why cant you define it and adapt to profit from it?

 

BlueHorseshoe

 

I should have clarified that. I wasn't referring to overall volume when I said "you know the diff was because of a reduction in Retail traders" The TF had a lot of 1 lot traders. With a 55 tick chart most (almost all) of the transactions that made a candle print were 1 contract trades. You could watch the Time & Sales book along side and see that. There were some 10 lots and of course when the Bigs were in larger order sizes but mostly the candle print was made up of 1 lot trades.

 

So the situation is that it now takes longer for 15 transactions to print a candle than it used to take 55 transactions to print a candle. This difference in time is due to a lot less 1 contract traders.

 

So while they were small traders and you may not notice a big difference in the overall volume it did however make a huge difference at a micro level.

 

I had developed a system that was based upon the speed of the market. Its too long to go into here but basically the side that has the speed wins. This is why I was using such fast moving charts. With practice you could become very good at reading the changes in speed. For this reason I would use Tick and not Vol charts because I wanted to read what the majority of traders were doing not the number of contracts. For example: Lets say that it took 3 seconds for 1 55 tick candle to print, or said another way it took 3 secs for 55 transactions to happen, but then 4 candles print in the same amount of time. You have a situation where 4 times as many Traders got excited about the market at that point in time vs the previous points in time. So what changed? Why did their level of enthusiasm increase? I don't really care its not important I just want to see if their enthusiasm persists and then capitalize on it (the side with the speed wins). Its more complicated than that but you should get the idea. Anyway if the market is void of these speed changes for you to pick up on then the strategy is useless which has been the case ever since the number of traders dramatically dropped off. Its like trying to read a room full of people if they all just sit there with blank expressions on their face.

Share this post


Link to post
Share on other sites
Actually Yes! and it was because of a posting that I saw you made last week. It was very ironic .......I am about halfway through it and it is a great book. If you remember the name of that other book let me know.

 

Thanks ! :)

 

Michael Durbin - High Frequency Trading

 

The nuts and bolts of HFT infrastructure, and a glimpse of strategies.

 

BlueHorseshoe

Share this post


Link to post
Share on other sites

I am seeing the average daily volume of ES dropping for the most part of the past 12-18 months.

 

I am not sure if it was because of HFT but I would argue that at some breaking point the HFT would not be able to find enough trading profits if the volume of ES is low enough?

 

That is, if there are enough HFT going on, wouldn't they trade against each other and eventually they would find no real edges / not enough profits in their systems? :2c: As such, the ever decreasing daily volume is a sign of this? :2c:

Share this post


Link to post
Share on other sites
I am seeing the average daily volume of ES dropping for the most part of the past 12-18 months.

 

I am not sure if it was because of HFT but I would argue that at some breaking point the HFT would not be able to find enough trading profits if the volume of ES is low enough?

 

That is, if there are enough HFT going on, wouldn't they trade against each other and eventually they would find no real edges / not enough profits in their systems? :2c: As such, the ever decreasing daily volume is a sign of this? :2c:

they have been trading against each other from the start of the molasses.

Share this post


Link to post
Share on other sites
they have been trading against each other from the start of the molasses.

 

If they are fighting against one another, the odd loters are not concerned and probably should find a way of profiting from it !?

Share this post


Link to post
Share on other sites

This is most likely true, the HFTs are entering the cannibal phase but that will only lead to fewer competing HFTs, they are never going away.

We need to demand that our exchanges provide free markets that do not favor one party over another. Exchange leaders have argued that allowing this HFT innovation to proceed is facilitating a free market. This is patently false, if it were true than the actions of the Hunt brothers in the silver market would not have been wrong, they were true pioneers in trying to corner the market. There will always be gamers in any system and HFT is no better than the Hunts, just because they don't drive tVhe market in a single direction does not mean they are not cornering the market thru volume and order book manipulation.

Watch for new exchanges to develop that will not allow any order to enter the market in under a certain time limit nor can that order be canceled until it has been resting in the market for a set time limit. The only way to level the playing field is to provide retail clients their own exchange. One where honesty and integrity rule and not special interest groups.

Shame on the CME for calling themselves leaders in innovation and for their free market hyperbole.

 

There will be many that disagree with me but having 20 plus years of pit trading and 10 years of electronic have taught me to understand the dynamics of both systems. I was all for electronic trading and in the beginning many professional traders like myself flourished without these market manipulators. When the exchanges allowed them unlimited and biased access to our markets.....well sadly most traders careers have crashed.

Share this post


Link to post
Share on other sites

I find this discussion interesting and one that is best said by UrmaBlum

 

""Success in the markets is not about instinct, divine inspiration or spontaneous intellectual combustion. It is about intelligent data processing, sound method and the management of risk and resource that is both effective and adaptive to change."

 

HFT is a fact of life and trading - if you can't deal with it other than to blame it for your own weaknesses - then you are in the wrong game."

 

I write algos, and am a computer geek. I personally find HFT equalizing. Before algos the stock market was reduced to a set of "men" like in the movie Floored. In fact I loved the movie for the one quote said by the trader, "before we were making fun of the nerds and now they own us". Yeah exactly! I remember how back then their attitude was, "suck it up pumpkin". Now I say to anybody who whines and cries that the market is destroyed, "suck it up pumpkin!"

 

Do I sound angry? Partially I am, because to a degree I am laughing as the market is now a quants dream. I can live with that. Does it mean many will not make money? No, in fact not true at all. You just have to adapt and change.

 

I don't write HFT's for myself because I don't have the desire to enter an arms race. But I do write algos that catch when HFT's and markets make "mistakes" and "mispricings".

Share this post


Link to post
Share on other sites

I don't think that HFT's are bad for the markets so long as they play by the same rules we retail traders play by. More volume = more liquidity which is good for the day trader. However, I have heard some complaints that HFT's can place "feeler" orders and quickly remove them to slightly manipulate small market movements. If they execute the same orders the rest of us do, then welcome to the party. HFT's did not cause the flash crash, but algos did. A flash pop is just as likely as a flash crash, but no one would complain about a +1,000 pt move in the Dow regrdless as to whether it was value based or not. Market behavior continually evolves. Just use good money management techniques and you'll do fine regardless as to the new players and the tactics they employ.

Share this post


Link to post
Share on other sites

suck it up pumpkin :rofl: :rofl: gotta like that. if anything they are making the market more precise...more liquidity as they operate off..well "perfect exact science" aka as math calculations devoid of emotionalism that humans have. our friend mitsubishi with out a doubt must love the algo's and hft's as he believes in trading with perfect math..right mitzy? they could affect ultra scalpers but not swing trading much. besides they are constantly evolving..if you are making money now, then you are beating them..so what is the worry? they are responsible for 70% or so of the volume. now a rogue algo/hft is a horse of a different color. but as long as they operate normally it is business as usual just more precise and more liquidity.

 

SUCK IT UP PUMPKIN :rofl: :haha: :rofl:

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • Date : 12th December 2019. Lagarde prepares ECB debut – 12th December 2019.   Policy unchanged Projections unlikely to change much Clues about review sought Style in focus Presiding over her first presser of the European Central Bank today, Lagarde is expected to confirm once again the current policy setting, giving time to ECB to focus on the planned review of its overall policy framework.Final Eurozone GDP and PMI readings broadly supported this neutral picture, while the confidence that a deep recession can be avoided is strengthening (Figure 1) despite the fact that German manufacturing and production numbers still look weak. The exports and the overall trade are actually holding up much better than expected, which together with still strong labour markets is underpinning hopes the net exports and consumption will continue to support growth not just in Germany.Figure 1 : December German ZEW investor confidence outcome, end the year firmly in positive territory at the highest level since February 2018.As there is nothing in the data really to challenge the ECB’s overall policy stance, the focus firstly turns into the tone and presentation style that President Lagarde will have. The “risk” is that the presser will be equally uneventful as her testimony before the European Parliament. Lagarde’s team building exercise seems to have worked and at least in public there has been a pretty consistent message since she took over, which is very likely to be confirmed today. Additionally it will be interesting to see whether she will back fully Draghi’s package.Citi Bank: All key interest rates will likely be left unchanged, and the forward guidance reaffirmed. The main interest at this meeting will be the new Eurosystem staff projections, extended to 2022, to gauge whether the September package will be sufficient to bring inflation back into line with the ECB’s target over the forecast horizon. If not, investors’ attention will quickly turn to the ECB’s toolbox and what instruments the Governing Council would be willing to use and when, in order to defend its credibility in the absence of large fiscal support. The upcoming strategic review of monetary policy will also likely be the focus of many questions.Hence as reported by Citi, other than Lagarde’s style, ECB projections could also monopolize the attention. Even though, the ECB remains ready to act again and tweak all its measures if necessary, it has already done a lot and now needs to keep an eye on the side effects of the very expansionary monetary policy, while politicians need to do their bit to support the economy.The central bank won’t be reducing the degree of stimulus any time soon with many analysts supporting that this will continue until mid-2020 unless there is a major change in circumstance.Central bankers will be conducting a comprehensive review of the policy framework, however, with a special focus on the inflation target. A more symmetric definition, which stresses that the ECB can see through lengthy inflation overshoots as well as periods of too low headline rates is likely to come in the first quarter of next year. The inclusion of owner-occupied housing costs into the HICP number also remains a challenge especially as house prices are rising rapidly in some centres, also thanks to the low interest rate environment.Bund yields have nudged higher over the past week, but the German 10-year so far failed to move lastingly above -0.3%. Uncertainty on trade and Brexit are keeping a lid on yields, although there is the risk that if things go the way markets want and a phase one trade deal is confirmed and in the UK PM Johnson gets his majority, there could be a sharp rise in yields, if markets price out further easing and start to look ahead to central banks removing some of the stimulus.However this is far away for now, while central bankers are not looking eager to add further easing.Always trade with strict risk management. Your capital is the single most important aspect of your trading business.Please note that times displayed based on local time zone and are from time of writing this report.Click HERE to access the full HotForex Economic calendar.Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE!Click HERE to READ more Market news. Andria Pichidi Market Analyst HotForex Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • USDJPY Remains Biased To The Downside   USDJPY faces further price weakness despite its price hesitation on Tuesday. On the upside, resistance comes in at 109.00 level. Above this level will turn attention to the 109.50 level. Further out, we expect a possible move towards the 110.00 level on a break of that area, A cut through here will open the door for more gain towards the 110.50. On the downside, support lies at the 108.00 level where a break will target the 107.50 level. Below that level will turn focus to the 107.00 level and then lower towards the 106.50 level. On the whole, USDJPY faces further downside threats.        
    • Sterling Advances Barely Hours To UK Elections As Latest Poll Predicts Conservatives Win In just two days from now, a major event that will set the trend for the currency market for the year 2020, the UK elections will be held. In the face of a Brexit extension, UK prime minister had pushed for an earlier election in the hopes of having a majority conservatives win in the parliament which will make the Brexit deal pass through easily. As the clock ticks, with barely less than 48 hours to this epochal event, the newest poll by Survation conducted for ITV’s good morning Britain show predicts a Boris Johnson win by 14 pts. ahead of Jeremy Corbyn‘s Labour party. The Brexit deal seemed to give the conservatives an edge as it accounted for 32% of the vote decision while NHS gave Labour party a slight edge. On the overall, a majority vote of 42% was predicted for the conservatives while Labour had 28%. Market Reaction as the Clock Ticks Optimism looms in the market as the prediction of a conservatives win will ease Britain’s exit from Europe by January 31 deadline. The EUR/GBP pair continued to fall till the early hours of today breaking the 0.8411 trend line targeting the 0.8149 resistance level. GBP/USD pair rebounded to consolidate briefly targeting 1.3381 resistance levels. Technical analysis within a 4-hour MACD shows that both pairs may likely touch down. CAD edged slightly higher advanced by USMCA news but yet to consolidate gains. The USD against a basket of five major currencies held steady awaiting FOMC’s minutes due out tomorrow. Against a basket of currencies, NZD’s dominance is the highest. Sterling also gained momentum firmed up by approaching UK elections. The safe-haven, the Japanese yen, and Swiss franc remain pressured as major events that will shape the market for 2020 are been anticipated. On the Asia side, significant market activity wasn’t recorded as most currency pairs held steady within a day’s range. In the Asian stock market, not so much activity was recorded being weakened by recently released Chinese PMI numbers. Most of the indexes closed a little lower while US stocks rose swiftly after Friday’s release of US non-farm payroll reports. The outcome of the December 15 deadline set by the US for the signing of a preliminary trade pact will determine the week’s direction and even further into the year 2020. Also due out later in the week is UK GDP figures and ZEW released out of Germany.
    • Date : 11th December 2019. FOMC Preview – 11th December 2019. FOMC Preview No policy changes or surprises are expected with today’s announcement (19:00 GMT) and Chair Powell’s press conference 30 minutes later. It will be interesting to see if, as expected, the voting is unanimous this time round. The FOMC members have expressed significant differences of opinion during 2019 as three rate cuts were implemented.  The apparent paradox of low unemployment and low inflation, the new “norm”. The two-digit unemployment rate (U-3) in November edged down to 3.53% from 3.56% in October, and a 3.52% cycle-low in September, all below the 3.58% prior cycle-low in April and a 4.00% rate at the beginning of the year. Current readings remain much lower than the 4.2% long-run unemployment rate projection noted in the September SEP, it is expected that this estimate will be trimmed today. Headline CPI rose 0.4% in October while the core index rose by 0.2%, for respective y/y gains of 1.8% and 2.3%, versus September figures of 1.7% and 2.4%. Today the November headline is expected to fall again to 0.2% and the core remains flat at 0.2% too. The Fed’s favoured inflation gauge, the PCE chain price measure, rose 1.3% y/y in October and expectations are for an uptick to 1.4% in November. The core PCE chain price measure rose 1.6% y/y in November, versus 1.7% in September, and expectations are for the pace to hold at 1.6% in November. The FOMC’s latest median estimates for 2019 inflation are 1.5% for the headline and 1.8% for the core. Hence, the focus will be on the Fed’s new quarterly forecasts, with expectations raised and likely to be mostly bullish results with a bump up in the median growth projection and a drop in the median dot to reflect a steady stance through 2020. However, the individual dots are likely to show both, forecasts for cuts and hikes. Chair Powell is expected to reiterate the US economy and policy are in a “good place,” (a phrase he has used a number of times lately) and could sound a little more upbeat after the strong jobs report. But, he will continue to warn of downside risks. The FOMC isn’t likely to announce any new measures on reserve management operations (QE?) or a repo facility. All steady into 2020 and beyond. USDIndex remains biased to the down side but has support around 97.40 and the 200-day moving average. A breach of this key support zone brings in 97.00 and the October low of 96.85. A break over 97.80 (the confluence of the 20 and 50-day moving averages) and 98.00 would be required before a re-test of the recent high at 98.50 could be considered. Always trade with strict risk management. Your capital is the single most important aspect of your trading business. Please note that times displayed based on local time zone and are from time of writing this report. Click HERE to access the full HotForex Economic calendar. Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE! Click HERE to READ more Market news. Stuart Cowell Head Market Analyst HotForex Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.