In the case of monetary policy, a dove is an individual who believes that low interest rates should be maintained. They maintain that low interest rates encourage growth within economies as they increase consumer borrowing demand and boost consumer spending.
Sustained low interest rates can cause notable increases in inflation, but doves believe that this negative effect is minimal in the grand scheme of things.
Doves are in favour of quantitative easing, considering it a means of stimulating an economy.
The opposite of a dove. These individuals are pro high interest rates as they see them as a means of controlling inflation. They are less concerned with economic growth.
Hawks are opposed to quantitative easing as they believe that it distorts asset markets.
A bull is an individual (or more specifically an investor) who believes that a certain market, industry or security will rise in value. A bull will purchase assets presuming that they will rise in value, and can consequently be sold at a later date for a higher price.
Example: Dollar bull
A Dollar bull is a speculator or investor who believes that the US Dollar is going in a positive direction and will rise in value in comparison to other currencies. For them, it is complete and utter madness to bet against the US economy and USD.
The opposite of a bull. Bears believe that a certain market, industry or security will decrease in value. Generally negative about a given market, security or asset (as opposed to a bull’s overwhelming optimism), bears will try to profit from falling prices.
Quantitative Easing (Q.E.)
A monetary policy that increases money supplies and lowers interest rates. In this policy central banks purchase securities from the market (or government securities like bonds). This inundates financial institutions with capital, thereby increasing the money supply with the aim of promoting lending and increasing liquidity.
A currency war is a scenario in which several countries deliberately attempt to weaken the value of their own currencies, thereby stimulating their respective economies. Quantitative easing and lowering interest rates can be used to decrease the value of currencies.
This is also known as “competitive devaluation”.
This is the buying of a currency, stock or commodity in the belief that it will increase in value.
This is also known as “long position”.
This is the selling of a borrowed currency, stock or commodity in the belief that it will decrease in value. For example, if an investor sold a borrowed currency on the market, the currency would eventually need to be returned. The investor does this by buying back the currency. If the currency has decreased in value, the investor buys it back for less than it was sold, consequently making a profit.
This is also known as “short position”.
This is the prevailing attitude of investors toward a particular market or security. The activities and changes in security price in a market communicate its sentiment e.g. increasing prices reveal a bullish sentiment.
A slang term used for the GBPUSD currency pair. The term comes from when the exchange rate between the British Pound and the US Dollar began to be transmitted across the Atlantic via a submarine communications cable in the mid-19th century.
The single currency, in economics, refers to a currency that is used by more than one country. The main example of this is the introduction of the Euro in the European Union.
There are many advantages of using a single currency, such as elimination of costs when converting currency and exchange rate uncertainty, increased transparency in price of goods, increased inward investment and lastly increased competition and efficiency.
Looking to gain that extra understanding of the fx markets?
Check out our blog every morning and see the latest news that will affect your currency transfer rate, so you know what to expect over the coming day/week.
GBP Friday’s trading session suffered from a dearth of economic data or political impetus. Futures markets continued to price in a circa 50% chance of a Bank of England interest rate hike at the August policy meeting.VIEW FULL ARTICLE
GBP UK government borrowing dropped to an 11-year low of £11.8bn for the first two months of 2018/19. The £3.356bn net borrowing for May was well below expectations of £5.268bn but alas, there was little positive Sterling impact as it slumped further to near 1.3100 against a strong Dollar.VIEW FULL ARTICLE
GBP UK CBI industrial orders bounced back more sharply than expected, printing 13 for June, up from -3 the previous month. Strong output increases for the second consecutive quarter suggest a solid industrial outlook should add support to the Pound.VIEW FULL ARTICLE
GBP In the absence of economic data, concerns that US-China trade tensions would escalate, undermining global growth and constraining UK growth, weighed on the Pound. Markets also downgraded their expectations of a more hawkish tone at Thursday’s monetary policy meeting.VIEW FULL ARTICLE