The Federal Reserve has spooked markets with its gnomic pronouncements, but human traders should take heart: Currency funds that rely on computer trading have fared much worse in 2013, as markets respond more to psychology and political intrigue. In the first half of the year, computer-managed funds earned a return of 0.7% and human-managed funds a return of 2.3%, according to data from Parker Global Strategies as reported by Bloomberg.
Probability models are finding it exceedingly difficult to predict how markets will react to central bank attempts to stimulate the economy in a world of low interest rates. Carbon- and silicon-based market participants alike have been following US Federal Reserve’s open market committee meetings and speeches by Chairman Ben Bernanke, trying to understand the Fed’s schedule for slowing its bond purchase program. Their interpretations and mis-interpretations of those messages cause big swings in the euro-dollar exchange rate, leaving funds in the carry trade across currencies in trouble if they can’t shift positions fast enough.
And if you think that’s fun, wait until President Obama nominates Bernanke’s replacement sometime in the next few months. Sources say the next Federal Reserve chair almost certainly won’t be a robot.
Original source of article: http://qz.com/108089