Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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De-Dollarization
De-dollarization is a slow but steady process of countries reducing dependence on the US dollar in international trade, reserves, and financial activities. The dollar has been the world’s primary reserve currency since the Bretton Woods agreement following the Second World War.
The US, as the world’s leading reserve currency, has immense economic and geopolitical leverage, including the power to impose sanctions, influence global borrowing costs, and run enormous deficits that other countries could not sustain.
De-dollarization is the fight to end such hegemony. It is reflected in the diversification of reserves, in the purchase and sale of euros, gold, or yuan by central banks, in bilateral trade agreements settled in local currencies, and in the creation of alternative payment systems that do not depend on dollar-based infrastructure such as SWIFT.
Progress has been slower than its advocates seem to think, partly because the dollar’s dominance is self-perpetuating: it is the most liquid, most trusted, most generally acknowledged currency. These are tough traits to imitate fast.
Example: After the West sanctioned Russia in 2022 and froze its dollar reserves, various countries rushed to examine the possibility of settling trade in currencies other than the dollar. China and Russia began to increase bilateral trade in yuan and rubles. A small alteration, but representative of a decades-long process.
Dead cat bounce
A dead cat bounce is a short, sharp rebound in the price of an asset that has been falling heavily; a rebound that happens to be short-lived. The name derives from the grim fact that even a dead cat will bounce as long as it falls from a sufficiently high height.
What it implies is that the bounce, per se, does not mean anything. It is not a recovery indicator or an indicator that the worst is over. It is merely a technical response; short sellers cashing in, bargain hunters dipping in, or the market taking a breath, before underlying selling pressure reassertion.
Dead cat bounces are dangerous because they are more easily recognized in hindsight than in real time. A trader confusing a true reversal may find themselves entangled in an ongoing downward trend.
Example: A firm issues a profit warning, and its stock declines by 35 percent over three days. On the fourth day, the share surges 8% as bargain hunters rush in. In headlines, it is termed as a recovery.
However, the underlying issues have not changed, and institutional investors continue to reduce exposure; in two weeks, the stock has reached a new low. That 8% bounce was the dead cat, and not the turning point.
Deal
In financial markets, a deal is a closed transaction; the point at which buyer and seller have settled on price and quantity and the transaction is binding. It sounds simple, and it is, but the word carries real legal weight.
When a deal is struck there is a commitment between the two sides. No need to revisit it just because the market shifted a few seconds later. This occurs rapidly in the over-the-counter markets, especially in the foreign exchange market.
A market-maker quotes a price, the opposite party accepts and that’s all; no exchange, no order book, no cooling-off period. Only two parties, a mutually agreed rate, and a settled trade.
The word’s casualness conceals its finality, which is one reason dealing rooms take it seriously. Saying “deal” does not mean that one is interested in the deal or that they have opened the doors for negotiation. It’s a commitment.
Example: A corporate treasurer calls the FX desk needing to sell $5 million and buy sterling. The dealer quotes 1.2650. The treasurer says “deal.” This one word locks in the rate. Whether cable has risen to 1.2665 in half a minute, the business is done and both parties are aware of it.
Deal ticket
A deal ticket is the official documentation of a transaction, containing all the essential information about the trade at the time it was completed. It’s the financial counterpart of a receipt, but with much more information and much greater legal force.
A standard deal ticket will capture the instrument traded, the direction of the trade (buy or sell), the size, the price, the time of the trade, the counterparties to the trade, the value date, and any other terms relevant to the trade.
In pre-electronic trading days, deal tickets were literal slips of paper filled out by hand on the trading floor. In present-day electronic markets, they are automatically generated the instant a trade is confirmed.
They are the main registry towards settlement, compliance, and resolving any conflict regarding what was settled and when.
Example: A corporate treasury desk has a large forward currency contract with its bank. The deal ticket produced at the point of execution displays the actual rate, the notional amount, the settlement date, and the names of the two counterparties.
Three weeks later, when the confirmation of the bank comes in with a slightly different rate, it is a deal ticket, timestamped and system-generated, that resolves the dispute.
Dealing spread
Dealing spread is the gap between the price that a market-maker will offer (the offer or ask) and the price that they will buy at (the bid). It does not appear anywhere on any invoice as a line item, but it is a very real cost, and one that is quietly built into every single trade that you conduct.
If EUR/USD is quoted at 1.1050/1.1052, you buy at 1.1052 and can only immediately sell at 1.1050. You’re two pips behind before the market has moved a single tick. The compensation the market-maker receives for providing liquidity and accepting the other side of your trade is that gap.
In deep, liquid markets, the spread is tight as competition among dealers maintains the spread tight. In thinner markets, or during times of stress or uncertainty, the spreads increase, in some cases dramatically.
Example: A retail forex trader decides to purchase GBP/USD minutes before a Bank of England rate decision. Normally, the spread is 1 pip. Right now it’s 8.
The market-maker on the other side is widening the spread because they are not sure which way the decision will send the pound, and they need that cushion to manage the risk he is taking on.
Debt ceiling
The debt ceiling is the legal maximum of the amount of money that the United States federal government is permitted to borrow. Congress sets the number, and once the Treasury reaches its limit, the Treasury may no longer issue debt to fund government operations or to meet existing obligations unless Congress votes to raise or suspend the limit.
One should realize that the debt ceiling is not a limit on future spending. The budget process has already been applied to make spending decisions. The ceiling constrains the government’s ability to borrow the funds needed to finance what it has already promised.
Once the limit is hit and Congress is slow to respond, the Treasury resorts to what it terms “extraordinary measures”, accounting gimmicks that afford Congress a few additional weeks of breathing room.
Should they run out of funds and no agreement is forthcoming, the US will face a default on its obligations, and the eventual impact on the world’s financial markets may be disastrous.
Markets got anxious in the summer of 2023 as the US hit its debt ceiling and the deadline approached. Treasury yields surged, the credit default swap spread widened and the dollar came under pressure.
All of these are signs that investors were tentatively pricing in the possibility that the world’s biggest economy could default. A few days before the deadline, they reached an agreement.
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