3.27.2009

Euro Higher as Stocks Rebound But Data Threatens with German CPI to Hit 6-Year Low (Euro Open)

The Euro rose against the US Dollar in overnight trading as Asian stocks extended the biggest weekly rally since late August 2007. The single currency may see pressure in the coming session with Germany’s Consumer Price Index set to print at the lowest in 6 years.

Key Overnight Developments

• New Zealand Economy Shrank at Fastest Pace Since 1992
• NZ Trade Balance Rises as Imports Fall More than Exports
• Japan’s Annual Retail Sales Fall Most in 7 Years

Critical Levels



The Euro added 0.4% while the British Pound rose 0.3% against the US Dollar in overnight trading. The greenback retreated as stocks extended the biggest weekly rally since late August 2007, with the MSCI Asian Pacific Index trading 0.6% higher.

Asia Session Highlights



New Zealand’s Gross Domestic Product fell -0.9% in the fourth quarter, bringing the annual rate of decline to a 17-year high of -1.9% in the year through December 2008. Yesterday, the International Monetary Fund said they expect New Zealand’s economy to shrink about 2% through 2009, noting that “households are constrained by high debt levels, falling house and equity prices, and uncertain employment prospects.” Still, overnight index swaps suggest the market is pricing a limited scope to further interest rate cuts, calling for at most a 25 basis point cut in April and no net change in a year from now.

Separately, the Trade Balance deficit narrowed substantially more than economists expected in February, showing a monthly surplus of NZ$4.8 billion. The annual trade deficit, a more accurate measure of the trend in trade flows because of the volatility in month-to-month data, narrowed for the second consecutive month to print at –NZ$5.2 billion in the year to February. While this looks good on the surface, the improvement in the headline figure came not from robust export growth but rather owed to the impact of deepening recession on consumer spending. Indeed, imports fell at an annual pace of -14.2%, outpacing the -6.6% drop in exports.

In Japan, Retail Sales fell for -5.8% in the year to February, the most in 7 years. Dwindling overseas sales are continuing to push Japanese companies to cut back production capacity, boosting unemployment to put downward pressure on consumer spending and overall economic growth. Deepening recession is beginning to translate into deflation: the Consumer Price Index slipped into negative territory for the first time in 16 months in February, shrinking at an annual pace of -0.1%. The current downturn could substantially accelerate if expectations of falling prices become entrenched, encouraging consumers and businesses to perpetually put off spending and investment waiting for the best possible bargain, thereby putting the brakes on economic growth altogether.

Euro Session: What to Expect



Germany’s Consumer Price Index is set to add a meager 0.1% in March, bringing the annual pace of inflation to a 6-year low at just 0.7%. Anemic economic performance has pressured price growth lower as Germany struggles increasingly deepening recession. The economy shrank -1.7% in the fourth quarter and current expectations call a -2.5% contraction through 2009, the deepest downturn since World War II. The slump is set to push inflation into negative territory, threatening to amplify the current malaise as expectations of falling prices encourage consumers and businesses to wait for the best possible bargain, perpetually putting off spending and investment.

For their part, the European Central Bank is expected to respond with an additional 25 basis point interest rate cut on April 2nd, with borrowing costs set to bottom at 1% through the second quarter. The ECB’s hesitation to commit to aggressive easing may pose substantial political risks down the road: calls to un-tether national monetary capabilities from Trichet’s measured approach are likely to find greater favor as the downturn hits home for an increasing percentage of Europeans, threatening to aggravate electorates against currency union. The reality of this structural threat to the Euro was reinforced earlier this week as the ECB President visibly tried to downplay it in a recent Wall Street Journal interview.

In the UK, the final revision of fourth-quarter Gross Domestic Product is expected to confirm that the economy shrank -1.5% in the three months to December 2008, the most in nearly three decades. Retail Sales fell substantially more than expected yesterday as rising unemployment continued to weigh on consumption, threatening to deepen the current downturn. The IMF has predicted that the UK will see the worst recession among the G7 nations. Separately, the Current Account deficit is set to narrow to -5.9 billion pounds in the fourth quarter, down from -7.7 billion in the three months to September. The reading suggests that trading terms deteriorated at an annual pace of 12.1% through 2008.

Written by Ilya Spivak, Currency Analyst
Article Source - Euro Higher as Stocks Rebound But Data Threatens with German CPI to Hit 6-Year Low (Euro Open)
Euro Higher as Stocks Rebound But Data Threatens with German CPI to Hit 6-Year Low (Euro Open)SocialTwist Tell-a-Friend

What is Forex?

If you would go out on a dinner with your friends or family and you mentioned that you were trading on the Forex market most of them wouldn’t know what you were talking about. The worst thing is that most of the Forex traders that join the Forex market don’t know what they are doing. Understanding what Forex is, is the first good step to your success at Forex trading.


The foreign exchange market (Currency, Forex, or FX) is where currency trading takes place. It is where banks and other official institutions facilitate the buying and selling of foreign currencies. Forex transactions typically involve one party purchasing a quantity of one currency in exchange for paying a quantity of another. The foreign exchange market that we see today started evolving during the 1970s when world over countries gradually switched to floating exchange rate from their erstwhile exchange rate regime, which remained fixed as per the Bretton Woods system till 1971.

Today, the Forex market is one of the largest and most liquid financial markets in the world, and includes trading between large banks, central banks, currency speculators, corporations, governments, and other institutions. The average daily volume in the global foreign exchange and related markets is continuously growing. Traditional daily turnover was reported to be over US$3.2 trillion in April 2007 by the Bank for International Settlements. Since then, the market has continued to grow. According to Euromoney's annual Forex Poll, volumes grew a further 41% between 2007 and 2008.

Forex Turnover

Forex Turnover
Main foreign exchange market turnover, 1988 - 2007, measured in billions of USD.
The purpose of Forex market is to facilitate trade and investment. The need for a foreign exchange market arises because of the presence of multifarious international currencies such as US Dollar, Pound Sterling, Yen, etc., and the need for trading in such currencies. Since you aren’t buying anything physical this kind of trading can be confusing. When buying a currency think of it as buying a part in that particular country’s economy because the currency rate reflects the economical situation of the country when compared to others.

Currencies

Currencies
List of most popular currencies on the Forex market

Forex used to be a closed market because only the “big boys” because you needed between 10 and 50 million $ to open an account. But today, with the development of internet, online Forex brokers have the possibility to offer their services to “little” traders. All you need to start is a computer, fast internet connection and information which you can find on this page also.

This enormous market is like the dangerous sea where you can meet lots of sharks and dangerous waters but at the same time it is the only one where two weeks of trading can hypothetically bring you $1,000,000 out of $1,000 of initial investment.

This is certainly hypothetically because a lot of newbie traders deal with their trades as gambling, that surely bring them to having nothing in the end. You should always keep the phrase "be careful!" in your mind. This market would give you its profit possibilities only if you learn the basic things hard and make lots of demo trading.

The statistics is that as much as 95% of traders come to losing their money at Forex, 5% have profit and less than 1% of traders make large fortune at Forex. You shouldn't produce, sell or advertise anything trading at Forex. Your assets are your knowledge, experience and a small amount of cash.

This market is a platform for banks, transnational corporations and individual traders to change the currencies they possess into other ones. This is the spot Forex market. At this market you can trade with up to 1:400 leverage which means that you'll get $400 on your account for each dollar invested. So, you can trade with the $400,000 sum having invested $1,000 onto your account.

Forex is unique among other world markets because in any time of day and night, somewhere in the world, a financial centre is open for business, banks and corporations exchange currency all the time, with a little lower frequency during the weekend.

Why to trade on Forex?

1. There is no commission fee for trading at Forex.
2. There is no intermediary, you can trade directly at Forex.
3. Forex is open 24-hours a day.
4. Nobody can influence the market for a longer period.
5. High liquidity.
6. Free demo accounts, analysis and charts.
7. Small accounts that allow everyone to try out his luck.

Hope this has answered a lot of questions you were asking yourself about Forex and that you can now start trading. Also make sure that you check out other articles on this blog which can help you earn your fortune.

Good luck to everyone!