4.22.2009

British Pound in Play with Unemployment to Hit 11-Year High as Recession Deepens (Euro Open)

The British Pound may see volatility in European trading hours with the unemployment rate set to rise to 4.6% in March, the highest in 11 years. Minutes from the last Bank of England policy meeting are also on tap for release. Overnight data saw Japan’s Trade Balance shrink 99% in the year to March while Australia’s CPI fell more than expected in the first quarter.

Key Overnight Developments

• Japan's Trade Balance Shrank 99% in Year to March as Exports Tumbled
• Australian Inflation Falls to Slowest in 18 Months as Recession Deepens

Critical Levels



The Euro extended losses in overnight trading, slipping as much as -0.3% against the US Dollar. The British Pound followed suit, testing as low as 1.4610 to the greenback.

Asia Session Highlights



Japan’s Trade Balance yielded a narrower monthly deficit than economists expected, printing at 97.1 trillion yen in March versus expectations of a -250.7 trillion shortfall. Still, the reading is far from encouraging, revealing trading terms tumbled by a whopping 99% from a year before. The pattern is a familiar one: dwindling overseas sales have pushed firms to scale back capacity, boosting unemployment and weighing on consumer spending to keep downward pressure on overall growth and sink Japan into the worst economic downturn since the Second World War. Indeed, exports shrank -45.6% in the year to March, a reading within a hair of last month’s record-setting -49.4% annual decline. As we suggested in our Weekly Trading Forecast, the release had little immediate impact on Yen price action because the forces behind the dour data have been priced into the exchange rate for some months now, with the Japanese unit supported by a reinvigorated link to equity markets.

In Australia, the Consumer Price Index showed the annual pace of inflation fell to 2.5% in the year to the first quarter, the slowest in 18 months. A report released earlier this week showed that Producer Prices unexpectedly fell during the same period, alluding to continue downward pressure on consumer inflation in the months ahead. Although the central bank has signaled the easing cycle is over, Westpac Banking Corp’s chief economist Bill Evans said last week the decision to hold off lowering interest rates now is likely a tactical one given the confidence boost typically seen after such actions: “We expect the bank will see the need to have ample capacity to be cutting rates through the second half of 2009…The economic case for cutting rates is undeniable.” Indeed, RBA Governor Glenn Stevens confirmed yesterday that the Australian economy was in recession but expressed confidence that his country will weather the downturn “better than most” citing increased Chinese demand for the antipodean country’s goods in the coming months.

Euro Session: What to Expect



Minutes from the April 9th policy meeting of the Bank of England headline the economic calendar in European hours. The rate decision itself was generally uneventful: policymakers kept rates unchanged at 0.5% and committed to continue quantitative easing (QE), all as expected. Still, as noted by DailyFX Strategist Terri Belkas, the release could spark volatility if it is revealed that policymakers are considering expanding or making significant changes to the existing 75 billion pound QE program. Further, the environment surrounding the release could prove to be a catalyst for downward pressure on the Pound: expectations call for Jobless Claims to rise 116k in March, the 14th consecutive monthly increase, to bring the Claimant Count (unemployment rate) to an 11-year high at 4.6%. If the minutes from the BOE meeting prove to be as bland as the original rate announcement, traders may punish the pound for insufficient urgency in the central bank’s policy response amid deepening recession.

Written by Ilya Spivak, Currency Analyst
Article Source - British Pound in Play with Unemployment to Hit 11-Year High as Recession Deepens (Euro Open)
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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!