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Strategy Video: Central Banks Supporting Long-Term EURUSD Bull Trend?

Strategy Video: Central Banks Supporting Long-Term EURUSD Bull Trend?

2014-07-01 01:07:00
John Kicklighter, Chief Currency Strategist
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Talking Points:

• Beyond retail speculators, money managers and big banks; the biggest player in FX is central banks

• Changing monetary policy for the local currency isn't the only way they can impact a currency

• A rise or fall in reserve demand can direct long-term trends - and EURUSD and GBPUSD are great examples

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Retail traders and large speculators stir short-term FX volatility. However, the bigger trends arguably fall under central bank efforts. Changing interest rates and stimulus programs has tremendous influence over the performance of currencies. Yet, there is another way central banks like the Fed, ECB and BoE can direct the long-term strength or weakness of currencies: reserve diversification. With the end of quarter, the IMF has released its COFER report showing the holdings of the different majors by global central banks. We look at what long-term trends are evolving from these large market participants' efforts and discuss how they add to trading picture alongside retail speculators and large money managers in today's Strategy Video.

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