Advanced Guide To The Bloomberg Terminal: Currencies And Commodities
Historically, the currency and commodity markets were dominated by institutional investors. However, in recent years this has begun to change as more and more individual investors have been drawn to these asset classes in a search for returns that are not correlated to traditional stock or bond markets. Furthermore, technological advances have provided greater pricing transparency for these markets and have also produced a variety of different vehicles that allow individuals to trade these asset classes in smaller denominations than were previously available.
Bloomberg can provide a valuable tool for tracking movements in the currency and commodity markets, analyzing individual currencies and commodities, and evaluating different investment vehicles.
Retail investors like currencies - also know as forex - because the returns are often uncorrelated to other asset classes, because they trade around-the-clock, and because there are a wide range of currency pairs that allow for expressing nearly any investment view one has. Because of the impact it can have on other financial markets, monitoring currency movements is important even for individuals that do not intend to directly trade currencies. Bloomberg has a range of capabilities for tracking currency market movements, analyzing the historical relationship between various currencies, and evaluating the future implied value of a currency. Many of the economic analysis and central bank tools the Bloomberg offers are also important for currency traders, as it is ultimately the strength of an economy and the level of inflation and interest rates that determine currency values in the long run (some of these tools were discussed in the fixed income section of this article as well as in the Beginners Guide to Bloomberg on Investopedia.)
Bloomberg's FX information platform provides a good starting point for currency traders. This page provides an overview of important currency rates, scrolling news headlines specific to the currency markets, and a menu of other important currency functions. Some of these functions allow a trader to look at a country's currency in greater detail, or to look at implied forward rates for currencies. There are also links to technical charting capabilities and economic calendars on this page.
Foreign Exchange Information Platform <FXIP>
Bloomberg also provides a homepage for generating trade ideas in the foreign exchange markets. This page provides further access to customizable market monitors, chart and graph packages, and foreign exchange forecast models. This page also contains a link to a tool for analyzing foreign exchange carry trades (carry trades involve borrowing in a low yielding currency and investing in a higher-yielding currency, and are a popular technique in the foreign exchange markets.)
SEE: Profiting From Carry Trade Candidates
Foreign Exchange Trade Ideas <FXTI>
One last overview page that individuals might find useful is accessed by typing <FXC> into the Bloomberg. Doing so brings up a market monitor page which provides key currency cross rates for most of the primary pairs traded in the foreign exchange market. This page is conveniently color-coded so that numbers in green indicate an increase, red a decrease, and yellow an unchanged currency rate.
Key Currency Cross Rates Monitor <FXC>
Commodities have been one of the top performing asset classes over the past decade, and have attracted a great deal of investor scrutiny. The pages detailed below provide tools for monitoring various commodity markets and analyzing individual commodity values. Bloomberg also provides tools for analyzing different vehicles for investing in commodities (i.e. futures, options, ETFs.)
As with most other asset classes, there are a number of market monitors for tracking commodity price movements. One good screen is accessed by typing <GLCO> into Bloomberg. This screen gives price updates and changes for a variety of key commodities. It is important to note that these prices are for the futures contract for the most actively traded month. This is an important difference that is specific to the commodity market and not found in other asset classes. Bloomberg has market monitors for spot prices (or cash prices) of commodities, as well as a variety of futures contracts and other derivatives. Which one the user prefers to look at is a matter of individual choice, but it is important to be aware of the differences and to realize that price levels and market movements can be quite different between spot prices and futures prices.
Commodity Market Futures Contracts Monitor <GLCO>
Users interested in one specific commodity, will find that Bloomberg offers a variety of monitors for analyzing a particular commodity in great detail. For instance, energy market traders will find that the screen below provides pricing details for a variety of types of oil and natural gas (NYMEX, Brent, Henry Hub Gas, etc.) Similar screens are available for traders in the metals and agriculture markets as well.
Energy Market Monitor <CPFC>
Finally, there are a number of screens such as the one detailed below which provide a trader with great detail on a particular commodity (in this case oil.) Typing <CMBQ> into the Bloomberg will display price levels and changes for different months of futures contracts, as well as open interest and spread differentials among the various contracts. The screen also shows price information for physical oil as well as transportation costs. There are also links to other pages which provide additional information on the oil market, including news headlines, refinery outages, and weather updates. Tools such as the <CMBQ> screen are quite sophisticated, but an active trader in the energy market might find that this sort of information provides the edge needed to consistently generate profits.
Oil Market Monitor <CMBQ>
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