Fri 6 Oct 2006
Earlier, we mentioned about strange fenomen, called market expectations.
The core is:”It is not so important what will actually happened. But what most important what expected to be happened.”
Previously we showed an example that expectation of the forex market about changing key interest rates in the future few weeks ahead more important and causes more effect on forex market, than actual Federal Reserve board’s (or Europen Central Bank, or Bank of England) decision weeks after.
Such expectations lives in the actual present stock prices, value of the gold or crude oil. The same way market expectations affect foreign currency exchange market.
What even more strange - market always finds excuses if excpectations missed.
Example. If market expected, for example, key interest rates to be increased in the Europe. Which should add value to European currency and Euro rate will increases over expectation weeks. Weeks later, suddently, key rates in the Eurozone will be unchanged. During next hours Euro will be oversold and the price will go down, but after, traders will find some excuse and the price will go up almost until initial value before key interest rates announcement.
By the way, such curve on the quote chart is called “cleave curve”.