British Pound, FOMC Minutes Delivers Big Gains for Currency Traders

After a few delays, we are thrilled to have launched the currency trading portion of the contest. Just looking at some of the results from the first official day of trading on Wednesday, this should prove to be a very exciting competition. Interestingly enough, all of the day's leaders were trading the British pound.

Ted Muniz from Vallejo, CA ended yesterday with the largest portfolio balance and percentage gain by managing to bring his currency trading portfolio balance up 7.28% to $107,280.88. Ted apparently likes to live on the edge as he entered a highly leveraged short GBP/JPY position right near the spike high of 203.78 seconds after the release of the minutes from the April FOMC meeting, which supported market expectations that the US central bank would leave rates steady at 2.00 percent when they meet again in June. FOMC minutes or Fed meetings always has a big impact on the currency market and in this case, nearly all of the Japanese Yen crosses sold off across the board on the heels of the sell-off in the stock market.

The FOMC minutes said that "most members viewed the decision to reduce interest rates at this meeting as a close call." FOMC members Richard Fisher and Charles Plosser also voted against the 25bp rate cut to 2.00 percent and said that they "felt the Committee should put additional emphasis on its price stability goal at this point, and they believed that another reduction in the funds rate at this meeting could prove costly over the longer run." These clear suggestions that the central bank would pause on future rate cuts triggered losses in most carry trades, including the DJIA, which holds a strong correlation with GBP/JPY and other yen crosses.

Meanwhile, our second place contestant on Wednesday, John Buckingham of Centennial, CO, and our third place contestant, Laura Kelley of Centerville, UT, played very similar strategies to Ted in that they took on substantial risk and were also very heavily leveraged. However, both John and Laura utilized short positions in a different currency pair or carry trade: the volatile GBP/CHF pair. So why did John end the day at second place up 6.89% at $106,890.16 while Laura trailed just behind and finished up 6.31% at $106,310.86? John entered his short position on Wednesday just an hour before the release of the FOMC minutes as GBP/CHF neared resistance at 2.0280/85, which allowed him to catch the pair’s decline throughout the afternoon. On the other hand, Laura entered her short position in the morning and held onto GBP/CHF throughout the day. However, her patience paid off and Laura liquidated her position right at the close of the US trading session.

Congratulations to our top three traders, Ted Muniz, John Buckingham, and Laura Kelley! With just under 9 weeks left in the contest, there's plenty of time for other contestants to take the lead -- best of luck!

Terri Belkas, Currency Analyst, Forex Capital Markets LLC

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