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The Federal Deposit Insurance Corporation in the final 12 CFR Parts 303 and 337 Rules effective April 1 2021 changed the concept of the national interest rate rate cap and the national interest rate.
“The FDIC views the “national rate” as as the average of rates paid by all insured depository institutions and credit unions for which data is available, with rates weighted by each institution’s share of domestic deposits.”
“The “national rate cap” is calculated as the higher of: (1) the national rate plus 75 basis points; or (2) 120 percent of the current yield on similar maturity U.S. Treasury obligations plus 75 basis points. The national rate cap for non-maturity deposits is the higher of the national rate plus 75 basis points or the federal funds rate plus 75 basis points.”
The national rate speculatively is the Money Market interest rate at 0.08 which matches the previous effective Fed Funds rate before the Fed raised. Add 75 basis points and the money market rate is capped at 0.83. The new effective funds rate should be 0.20 or capped at 0.95.
The old savings rate at 0.06 is capped at 0.81 while the new savings rate should be 0.18 and capped at 0.93. Savers for the first time in 15 years contain a shot to save and earn from deposits.
Checking accounts and 1 month Certificate of Deposits at 0.03 are both capped at 0.79 for checking and 0.83 for CD's. The new rate by speculation is 0.15 and capped at 0.89 and 0.90.
CD's from 3 month to 60 months or 5 years are factored and pay interest from current 0.06 to 0.28 and capped from 1.01 to 2.69. The Treasury equivalent factors as 0.22 to 1.62.
THE CD question is to holding periods for either CD's or Treasury yields in order to earn intertest.
The FDIC as regulator to banks instituted the new 51 page rules along with historical background to allow banks competitiveness to less well capitalized institutions and to the fast moving electronic market to move funds within seconds.
JP Morgan is restricted to offer higher rates than a less well capitalized institution to drive the institution into bankruptcy. All bank Deposit rates operate under the same rules.
Speculation, the Fed at 25 basis points to each raise adheres to the principles to the National Average and National Rate cap. Bullard may vote for a 50 point hike but it won't ever happen at one meeting. We're restricted to 25 point raises from today to eternity or when the Fed had enough.
The UK banking system works as closely and competively as the FDIC to interest payouts.
As to Commercial Paper rates and most at 270 day holding periods is not addressed yet a spotty record to daily reporting existed over last weeks. The imperative to non Financial Commercial paper to address off shore rates is to use implied rates from Libor while Commercial Paper Financial for US Money markets holds near the effective Fed funds rate.
Next week
EUR/USD at near 1.1100's is 1/2 way from 1.0900 bottoms to 1.1300's target. A close today in the vicinity of 1.1014 then bodes well for longs next week. We;re long anyway but a more perfect entry is the goal.
EUR/NZD from the 1.6500 target reported 2 weeks ago traded to 1.6238 highs from 1.5900 lows. Currently oversold and long for next week.
EUR/AUD sits 22 pips below its Sunday open at current 1.4978.
EUR/CAD at 1.3957 trades near its Sunday open at 1.3907. Long for next week.
USD/JPY and JPY cross pairs
USD/JPY and EUR/JPY are driven by shortest term averages from 5 to 20 to 50 day averages. Shortest term averages are the only remaining averages as remainder averages dated to 1999 are deeply overbought.
USD/JPY at 119.00's and 120's trade at far extremes to short averages. USD/JPY target remains 115.00's, 114.00's then 113.00's and a short only strategy. Note the 600 number from 119 to 113.00's.
To travel off kilter. Note current longer term targets sit at 500 to 600 pips and this once every 2 year phenonemon exists at present and a fabulous opportunity to bank many pips. The magic numbers for overall currency trading are 2, 3, 4, 5, 6 and rarely 8.
Without detail, trust the analysis from deep research to prior past periods over years. Because currency prices work on Futures IMM over 3 months, targets will achieve anywhere from this day to at most 3 months. Normally targets achieve from 1 to 2 months and not normal for 3 months.
The overall period to great and easy trades as we are in presently, always hits in the February to May or March to June time frame. And once every 2 years without fail. Again the number 2 for 2 years, 2 week cycle, 200 pip targets, 2 day average on Monday, divide 2 to obtain an average.
On 5 and 600 pips targets, entry doesn't matter, nor stops, charts and all the rest of the retail tools. This is a golden period to bank pips. When May and June trades, we're back to range trades as the anchor pair vs Cross pair relationship fully normalizes. All must work for the trades.
EUR/JPY trades above its top at 129.00's and must trade back to minimum 129.00's. Extremes are located from low to middle 132.00's to low 133.00's. EUR/JPY historically traded 132.00's to 134.00's over many past years and dropped significantly. No difference exists today.
CAD/JPY look out below as supports remain at 89.00's and solid. AUD/JPY and NZD/JPY same principles as CAD/JPY, look out below and hello to 200 pips lower.
GBP
GBP/JPY as reported 2 weeks ago ranges from 148.00's to 158.00's and at 156.00's is not only overbought but approaches its range tops. Short is the way forward.
GBP/CAD, GBP/AUD, and GBP/NZD long, long next week and many weeks to come.
USD/CAD long, long for many weeks to come.
GBP/USD approaches its 5 year average at 1.3166 Vs USD/CAD at 1.3007.
Note the exchange rate lineup EUR/JPY 131.58, GBP/USD 1.3133 and USD/CAD 1.2606. Both GBP/USD and USD/CAD are oversold while EUR/JPY prices are to high. This relationship governs next moves and EUR/JPY will lead the way forward.
AUD/USD and NZD loolk out below.
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