BOE EXPECTED

The BoE is expected to keep their benchmark interest rate at 0.50% as remaining downside risks to growth will most likely lead the central bank standing pat until the end of 2009.
Fundamental OutlookThe BoE is expected to keep their benchmark interest rate at 0.50% as remaining downside risks to growth will most likely lead the central bank standing pat until the end of 2009. Although, we are seeing global leaders at the G-8 meeting talk about developing an exit strategy from the current easing cycle, there is a consensus that it is still too soon to consider executing it. However, there is increase speculation that the MPC will add to their quantitative easing measures by another £25 billion bringing the total to £150 billion. Therefore, look for an accompanying statement from the central bank outlining their intentions and giving an assessment of the impact of ongoing efforts. Sterling has remained under pressure since speculation started to increase that the BoE would add to the current bond purchase program and confirmation of it could lead to further losses. However, if the central bank signals that it will refrain from such measures, it could lead to a sharp reversal. The technical outlook is presenting scenario’s which would support each outcome which would leave us on the sidelines until after the potential statement.

Forex Trading the Bank of England Interest Rate Decision
The central bank in the U.K. kept the benchmark interest rate unchanged at 0.50% in June, and maintained its GBP 125B asset purchase program in an effort to stimulate the ailing economy. The Bank of England minutes showed the board voted unanimously to carry out its current policy objects in place, with the MPC stating ‘that the second-quarter decline in consumption would be less than the committee had previously anticipated.’

WASHINGTON (Reuters) - The Federal Reserve on Tuesday extended, by six months, programs designed to funnel billions of U.S. dollars to markets worldwide and keep money flowing in a banking system shattered by the worst financial crisis since the Great Depression.
"Continuing substantial strains in many financial markets" made the actions necessary, the Fed said as it announced that it was extending through October 30 "swap lines" that provide U.S. dollars to 13 central banks. It said the Bank of Japan would consider a similar extension at its next policy meeting.
In addition to prolonging the currency swap lines that were due to expire on April 30, the U.S. central bank said it would extend through October 30 a host of other programs providing liquidity to the U.S. commercial paper and money markets, and to large Wall Street firms.
Acting as a lender of last resort, the Fed launched a myriad of programs over the past 13 months to try to keep credit flowing through a financial system devastated by mounting losses on mortgage-related assets.
The Fed's latest moves were widely anticipated as actions by the U.S. and other central banks have met with limited success so far in reviving financial institutions hit hard by mortgage-related losses and the global economic downturn.
"The Fed is saying it's doing everything to support financial markets," said Harm Bandholz, an economist for UniCredit Research in New York. "To let any measure expire would be counterproductive."
The currency swaps provide foreign central banks with dollars from the Fed to lend to banks in their jurisdictions to ease dollar funding conditions. The swap facilities with the Bank of England, the European Central Bank and the Swiss National Bank have are for "quantities sufficient to meet demand" -- in other words, no upper limit.
Other central banks said on Tuesday the swaps will continue to be helpful at a time of turmoil.

1st, It consists market but no trading field

The finance industry in the western countries consist two sets of systems, namely the centralism business central operation and there is no fixed place for such business network. Stock trading is being traded through stock exchange. Like the New York Stock Exchange, the London stock market, the Tokyo stock market, respectively is American, English, the Japanese stock main transaction place, it is a centralism business financial commodity, its quoted price, the transaction time and hand over to the procedure all consist of unification the stipulation, and has established the same business association, it has formulated the same business rules. The investor could buy and sells the commodity through the broker company, this is known as "consist of trading market and trading field".
But foreign exchange business is done without any unification operation market and business network, it has no centralism unified place like the stock transaction. But, the foreign currency trading network actually is globally, and it has formed a organization which has no formal organization, the market is relied through an approval way and the advanced information system, Forex traders do not consist any membership qualification for any organization, but must obtain colleague’s trust and approval. This kind of Forex market which has no trading field is known as "consist of market but no trading field". Each day, the trading volume in the global Forex market involves billions of U.S dollars, the so huge large amount fund, is being control under both the non-centralism place and non central governance system, plus it is settle based on non-government governance.
2nd, Circulation work Due to the different geographical position of the various financial centre, the Asian market, the European market, the Americas market because of the time difference relations, it has become an entire day 24 hour continued operation whole world foreign exchange market.
Early morning 0830 (New York time) New York market opens, 0930 Chicago market opens, 1830 Sydney opens, 1930 Tokyo opens, 2030 Hong Kong, Singapore open, before dawn 1430 Frankfurt opens, 1530 o'clock London market opens. So 24 hours uninterrupted movements, the foreign exchange market becomes a day and night market, only on Saturday, Sunday as well as the various countries' significant holiday, the foreign exchange market only then can close.
This kind of continued operation, provided no time and spatial barrier ideal outlet for investors, the Forex trader may seek the best opportunity to carry on the transaction. For instance, Forex trader buys up the Japanese Yen in the morning at the New York market, in the evening Hong Kong market opens the Japanese Yen rises, the Forex trader sells in the Hong Kong market, no matter Forex trader in where, he all may participate in any market, any time business. Therefore, the foreign exchange market may say is does not have the time and the spatial barrier market.
3rd, Zero and Game In the stock market, the rise or the drop of stock market could influence the value of the stock whether to rise or drop, for example the Japanese new date iron stock price falls from 800 Japanese Yen to 400 Japanese Yen, the value of this stock has been reduced to half. However, in the foreign exchange market, the value of a stock and a currency is being calculated differently, this is because the exchange rate is refers to the exchange ratio both countries currency, the exchange rate change will influence one kind of monetary value to reduce and at the same time another kind of monetary value increase. For instance in 22 years ago, 1 US dollar exchanges 360 Japanese Yen, at present, 1 US dollar exchanges 110 Japanese Yen, this explains the Japanese Yen currency value rise, but US dollar currency value drops, in the end the value will not reduce or increase. Therefore, some people described the foreign currency trading is "zero and the game", exactly said is the wealth shift.
In recent years, investment foreign exchange market fund has continuously increased, the exchange rate fluctuation expands day by day, urges the wealth shift to be larger, the daily trading volume of the global foreign exchange involves 150 billion US dollars, the rise or falls 1%, means that the 150 billion funds has been shifted. Although the foreign exchange rate change is very big, but, any kind of currency will not become waste paper, even if some kind of currency unceasingly falls, however, but generally it represents certain value, only if such currency has been abolished.

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INTRODUCTION TO FOREX

Being the main force driving the global economic market, currency is no doubt an essential element for a country. However, in order for all the countries with different currencies to trade with one another, a system of exchange rate between their currencies is needed; this system, is formally known as foreign exchange or currency exchange.
In the early days, the system of currency exchange is supported solely by the gold amount held in the vault of a country. However, this system is no longer appropriate now due to inflation and hence, the value of one’s currency nowadays is determined through the market forces alone. In order to determine the value of a currency’s exchange rate, two main types of system is used which is floating currency and pegged currency.
For floating exchange rate, its value is determined by the supply and demand of the global market where the supply and demand is bound by all these factors such as foreign investment, inflation and ratios of import and export. Normally, this system is adopted by most of the advance countries like for example UK, US and Canada. All of these countries have a similarity where their market is well developed and stable in economic terms. These countries choose to practice this system due to the reason where floating exchange rate is proven to be much more efficient compared to the pegged exchange rate. The reason behind this is because for floating exchange rate, the market itself will re-adjust the exchange rate real-time in order to portray the actual inflation and other economic forces. However, every system has its own flaw and so does the floating exchange rate system. For instance, if a country suffers from economic instability due to various reasons such as political issues, a floating exchange rate system will certainly discourage investment due to the high risk of suffering from inflationary disaster or sudden slump in exchange rate.
Another form of exchange rate is known as pegged exchange rate. This is a system where the value of the exchange rate is fixed by the government of a country and not the supply and demand of the market. This system is called pegged exchange rate because the value of a country’s currency is fixed to another country’s currency. As a result, the value of the pegged currency will not fluctuate unlike the floating currency. The working principle behind this system is slightly complicated where the government of a country will fixed the exchange rate of their currency and when there is a demand for a certain currency resulting a rise in the exchange rate, the government will have to release enough of that currency into the market in order to meet that demand. However, there is a fatal flaw in this system where if the pegged exchange rate is not controlled properly, panics may arise within the country and as a result of that, people will be rushing to exchange their money into a more stable currency. When that happens, the sudden overflow of that country’s currency into the market will decrease the value of their exchange rate and in the end, their currency will be worthless. Due to this reason, only those under-developed or developing countries will practice this method as a form to control the inflation rate.
However, the truth is, most of the countries do not fully practice the floating exchange rate or the pegged exchange rate method in reality. Instead, they use a hybrid system known as floating peg. Floating peg is the combination of the two main systems where one country will normally fixed their exchange rate to the US Dollars and after that, they will constantly review their peg rate in order to stay in line with the actual market value.
The Foreign exchange market, or commonly known as FOREX, is the largest and most prolific financial market because each day, more than 1 trillion worth of currency exchange takes place between investors, speculators and countries. From this, we can deduce that the actual mechanism behind the world of foreign exchange is far more complicated than what we may already know, and that, the information mentioned earlier is just the tip of an iceberg.

American-style

Ask The quoted price at which a customer can buy a currency pair. Also referred to as the 'offer', 'ask price', or 'ask rate'.
Base Currency For foreign exchange trading, currencies are quoted in terms of a currency pair. The first currency in the pair is the base currency. For example, in a USD/JPY currency pair, the US dollar is the base currency. Also may be referred to as the primary currency.
Bid The quoted price where a customer can sell a currency pair. Also known as the 'bid price' or 'bid rate'.
Bid/Ask Spread The point difference between the bid and ask (offer) price.
Call A call option gives the option buyer the right to purchase a particular currency pair at a stated exchange rate.
Counterparty The counterparty is the person who is on the other side of an OTC trade. For retail customers, the dealer will always be the counterparty.
Cross-rate The exchange rate between two currencies where neither of the currencies are the US dollar.
Currency pair The two currencies that make up a foreign exchange rate. For example, USD/YEN is a currency pair.
Dealer A firm in the business of acting as a counterparty to foreign currency transactions.
Euro The common currency adopted by eleven European nations (i.e., Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain) on January 1, 1999.
European-style option An option contract that can be exercised only on or near its expiration date.
Expiration This is the last day on which an option may either be exercised or offset.
Forward transaction A true forward transaction is an agreement that expects actual delivery of and full payment for the currency to occur on a future date. This term may also be used to refer to transactions that the parties expect to offset at some time in the future, but these transactions are not true forward transactions and are governed by the federal Commodity Exchange Act.
Interbank market A loose network of currency transactions negotiated between financial institutions and other large companies.
Leverage The ability to control large dollar amount of a commodity with a comparatively small amount of capital. Also known as 'gearing'.
Margin See Security Deposit.
Offer See ask.
Open position Any transaction that has not been closed out by a corresponding opposite transaction.
Pip The smallest unit of trading in a foreign currency price.
Premium The price an option buyer pays for the option, not including commissions.
Put A put option gives the option buyer the right to sell a particular currency pair at a stated exchange rate.
Quote currency The second currency in a currency pair is referred to as the quote currency. For example, in a USD/JPY currency pair, the Japanese yen is the quote currency. Also referred to as the secondary currency or the counter currency.
Rollover The process of extending the settlement date on an open position by rolling it over to the next settlement date.
Retail customer Any party to a forex trade who is not an eligible contract participant as defined under the Commodity Exchange Act. This includes individuals with assets of less than $10 million and most small businesses.
Security deposit The amount of money needed to open or maintain a position. Also known as 'margin'.
Settlement The actual delivery of currencies made on the maturity date of a trade.
Spot market A market of immediate delivery of and payment for the product, in this case, currency.
Spot transaction A true spot transaction is a transaction requiring prompt delivery of and full payment for the currency. In the interbank market, spot transactions are usually settled in two business days. This term may also be used to refer to transactions that the parties expect to offset or roll over within two business days, but these transactions are not true spot transactions and are governed by the federal Commodity Exchange Act.
Spread The point or pip difference between the ask and bid price of a currency pair.
Sterling Another term for British currency, the pound.
Strike price The exchange rate at which the buyer of a call has the right to purchase a specific currency pair or at which the buyer of a put has the right to sell a specific currency pair. Also known as the 'exercise price'.

22 December 2008
Dear Dukascopy (Suisse) SA clients!Due to the seasonal holidays trading on our platform will be closed during the following time:From 22:00 GMT on Wednesday, 24.12.2008 until 22:00 GMT on Thursday, 25.12.2008From 20:00 GMT on Wednesday, 31.12.2008 until 22:00 GMT on Thursday, 01.01.2009Over-the-weekend use of leverage policy will apply prior to market closing for the above dates. As usual, trading will be closed and use of leverage limitation will apply for the weekends as well.With best wishes for the season,Dukascopy Live Trading team.