Around The World – Investing In Foreign Currency

Tweed-Economics
Tweed-Economics

The global currency market is by all estimates the largest liquid financial market dedicated to currency trading. The market is largely unregulated and private with no intermediaries to guarantee compliance with regulations. According to Investopedia, the most popular currencies on the market are the US Dollar, the Euro, Great British Pound and the Japanese Yen. 

The US Dollar tops the list as it is considered an intermediary in triangular currency transactions and the unofficial reserve currency of the world. The Euro is a major currency used by many countries in the Eurozone, including Germany, France and Italy. The currency also ranks as the second largest reserve currency and the most traded after the US dollar. The Japanese Yen is easily the most traded currency in the Asian continent, especially in the Pan–Pacific zone. 

How to trade in foreign currency 

With the advances in technology, foreign currency trading can be conducted from anywhere in the world. The leading currency trading centers of the world include New York, London, Tokyo, Frankfurt and Hong Kong. Because of its vast size, a number of entities have been established to promote the trade. According to the Balance, online brokerages and margin trading accounts have in the recent times grown their market share in an industry dominated by banks and institutional investors. Investors can make the most out of the trade by understanding the underlying risks and benefits of currency trading. Below are key benefits of trading in foreign currency: 

• Access to a large and liquid global currency market 

• 24-hour operation and diverse trading styles 

• Opportunity to diversify the investment portfolio 

• Low cost of trading 

• No central exchange 

In terms of volume, the foreign currency market averages over $5 trillion in daily trading. The two main risks of trading in foreign currency are high leverage and high levels of volatility. High levels of market volatility are often caused by negative economic reports and weakened markets. When volatility becomes an issue, central banks are sometimes forced to intervene in order to stabilize the currency and the market in general. The other downside is that foreign exchange market makes very small increments, which tend to create high leverage. To improve long term returns and mitigate the risks, an analysis of risk-management strategies is crucial. 

Foreign currency trading outlook 

A number of platforms and instruments have been developed to enhance currency trading. Forex investors can invest in currencies either directly or indirectly using vehicles like Exchange Traded Funds (ETFs). ETF funds usually buy and manages currency portfolios on behalf of investors using effective trading tools like futures contracts and swaps. Investors who do not have a lot of money to put down can benefit from shorting strategies deployed by ETFs. The ETF is highly recommended for Investors who are not versed with the intricacies of foreign currency trading. 

For the inquisitive investor, the three leading ETFs for foreign currency trading are CurrencyShares, Wisdom Tree and ProShares. These ETFs trade in a wide range of currencies, including Chinese Yuan, Brazilian Real and Australian Dollar. If you are a seasoned investor, foreign currency trading can be interesting because you can make a side bet against the currency you are holding. Owing to insurance backup, Forex investors also have the opportunity to trade weak currencies without suffering undue negative exposures. 

According to a Forbes magazine report published in 2017, investors can make money in a volatile market through currency hedging. The strategy provides protection against losses emanating from negative currency movements, which often lead to uncertainty. For instance, as China moves into the marketplace with its reserve currency, investors worried about the future strength or weakness of the currency against the Euro and the dollar will find solace in hedging strategies. Concerns about China are heightened by prevalent stock bubbles, unpredictable real estate market and lack of transparency about the country’s debt. 

For investors in Europe, the prevailing low interest rates offers a perfect opportunity to off load currencies on the futures market at rates higher than the spot prices. The two leading currency hedge funds in the world today are WisdomTree Europe Hedged Equity Fund and iShares Currency Hedged MSCI EAFE ETF. According to the Forbes magazine, there are about 89 exchange traded funds with currency hedges aligned to their portfolios. These exchange funds account for about $40 billion of the $450 billion held in foreign stock ETFs. 

If you want to achieve long-term success in foreign currency trading, you need to learn continuously; acquaint yourself with prudent capital management techniques and understand the risks that lay I the way. It is also important to persevere because success may not be achieved overnight. For personalized training and assistance, you get in touch with an investment advisor who understands foreign currency investment and portfolio management.

Mortgage Rates and Indicators for 2019 – What To Look Out For

Tweed-Economics
Tweed-Economics

The American Dream is something people still believe in because it was sold as one of the best financial and life choices an individual or a family could do. However, people were misled into putting their lifetime savings and most people using loans to purchase a house in which they would live and raise a family. We say they were misled because a house does not provide you with income, there are maintenance and repair expenses throughout the life of the home, and you may even be put “under water” if the home ends up being less valuable than you bought it for. For that reason in this article we will be discussing the topic of mortgage rates, indicators, and what is already happening in 2019.

Mortgage Rates and Indicators for 2019

By definition, a mortgage rate or rates are the rate of interest that is charged by the specific lender loaning you the money to purchase the property. From late 2017 through the year of 2018 the delinquency rates fell more than before. We can give the credit to our current president, Donald Trump, for increasing employment and thus providing a better employment rate which raises income and lowers the delinquency even more. This will also result in home prices increases close to 5% in 2019.

Because not every year is the same, what happened the last year will not happen in 2019. This year there are four things we advice people to watch out for if they’re going to purchase a home or giving advice to someone who will. So here they are, key indicators to follow in 2019:

  • Contribution of Residential investment to GDP growth
  • Real house prices
  • Existing home sales
  • 30-year fixed mortgage rates

The residential investment contribution to the GDP is a major indicator and connection between the real estate cycle and the business one. It is a combination of new residential construction units, but also includes money spent on new additions to existing dwellings and any remodel money.

Real house prices change and vary widely no matter what period of time you look at. Whether the prices are real or adjusted for inflation the prices will change during the business cycles as well. These house prices will affect the lending market as well and so it is imperative to stay on top of every nuance that occurs.

Another indicator of how mortgage rates can function is the number of existing home sales for any given year. If there are more home sales than previous years and the pattern seems not to be slowing down, then what will or can happen to mortgage rates is that they will slowly begin to drop. Mortgage rates drop because of the amount of loan programs available respective to the amount of buyers looking for a loan. It’s a basic economic principle of supply and demand. Vice versa, when there are thousands of people looking for mortgage loans and only a few providing the loans, the rates will be a lot higher because there’s more demand than product available.

Rates by Company

Below are some of the forecasts for four of the major residential real estate mortgage lenders, Freddie Mac, Fannie Mae, NAR, MBA.

MBA

First Quarter 2019, MBA Mortgage Rate Forecast: 4.8%

Second Quarter 2019, MBA Mortgage Rate Forecast: 4.9%

Third Quarter 2019, MBA Mortgage Rate Forecast: 5.0%

Fourth Quarter 2019, MBA Mortgage Rate Forecast: 5.0%

Fannie Mae

First Quarter 2019, Fannie Mae Mortgage Rate Forecast: 4.8%

Second Quarter 2019, Fannie Mae Mortgage Rate Forecast: 4.8%

Third Quarter 2019, Fannie Mae Rate Forecast: 4.8%

Fourth Quarter 2019, Fannie Mae Rate Forecast: 4.8%

Freddie Mac

First Quarter 2019, Freddie Mac Mortgage Rate Forecast: 4.9%

Second Quarter 2019, Freddie Mac Mortgage Rate Forecast: 5.0%

Third Quarter 2019, Freddie Mac Mortgage Rate Forecast: 5.2%

Fourth Quarter 2019, Freddie Mac Mortgage Rate Forecast: 5.3%

NAR

First Quarter 2019, NAR Mortgage Rate Forecast: 5.0%

Second Quarter 2019, NAR Mortgage Rate Forecast: 5.1%

Third Quarter 2019, NAR Mortgage Rate Forecast: 5.2%

Fourth Quarter 2019, NAR Mortgage Rate Forecast: 5.3%

In conclusion in this article we discussed the topic of mortgage rates as well as the indicators that will show the way in which rates either increase or decrease in any given period of time. As of right now the mortgage rate industry is looking like it did in the earlier 2000s, though not as it was in 2008. Mortgage rates increase in 2017 but began to drop in 2018 now carrying this trend into 2019. To summarize this article as well as some of the numbers shown, we can say that mortgage rates will not be a threat to the real estate industry and it can be a great thing if the inventory improves while home prices begin to flatten out.