USD - Dollar Drops Against the Majors as Equities Rally
The Dollar recorded an extremely volatile day of trading as a variety of factors helped push up the demand for riskier assets, whilst reducing the demand for safe-haven positions. Equity markets in the U.S. rallied as many companies in the U.S. recorded far better-than-expected results. These led to major banking shares, such as Bank of America and Citigroup making remarkable gains yesterday. The market also continued to move on the better-than-expected U.S. consumer confidence figures from Tuesday. The equity market surge and Dollar decline was also owed to Tuesday's impressive U.S. Consumer Confidence figures.
The USD tumbled by more than 130 pips against the EUR in yesterday's trading to close at 133.22. This is much owed to the fall in demand for safe-haven currencies, as it seems that the U.S. recession may be bottoming out. This is despite poor U.S. GDP figures that were released yesterday. The Dollar also made losses against the GBP to end the day down 125 pips at 148.30. However, versus the JPY, the USD finished higher 0.6% or 60 pips as the demand for the safe-haven Yen plummeted in yesterday's trading. This was largely owed to news that the economic situation in Japan, China and the U.S. was starting to improve.
As of today, there are a number of important U.S. economic data releases that are set to be released. The most important of which are the Unemployment Claims, Personal Spending, and Personal Income figures that are set to be released at 12:30 GMT simultaneously. The market is likely to be very volatile on the release of these figures. Additionally, later on today, the market is likely to take into account the poor U.S. GDP figures that were released yesterday. Therefore, the USD may reverse some of the losses that it made yesterday against its major currency crosses as investors may return to the safe-haven Dollar. We could see the EUR/USD trading near the 1.3200 level by the end of the day.
EUR - EUR Soars Versus the USD
The EUR experienced a bullish day of trading yesterday, mainly due to the European Consumer Confidence figures, showing its first month on month rise in 11 months. This added to the news from across the developed economies from the U.S. to Japan that the worst of the global economic recession may be over. The bullish equity markets in the Euro-Zone and in Britain were partly due to that of the U.S., partly due to the upgrade of British banks by brokers, and the fall in demand of safe-haven currencies. The EUR made its most notable gains against the USD in Thursday's trading.
The EUR gained about 130 pips against the Dollar in Wednesday's trading as demand for safe-haven currencies plummeted as the global economy begins to pick up. The pair closed at the 1.3322 level. The EUR/JPY cross rose by an impressive 210 pips to 129.90 as demand for the most safe-haven currency of all as of late plummeted as indicators from Japan showed that her economy had improved in April. Against the Pound, the EUR did make marginal gains as fears of a prolonged European recession dissipated slightly. The pair closed up 15 pips at 0.8980.
Looking ahead to today, the Euro-Zone and Britain are set to publish a number of important data releases. These include the British Nationwide HPI at 6:00 GMT and the Euro-Zone Unemployment Rate at 21:00 GMT. These figures are likely to determine the GBP and EUR's strength going into end of week trading. Forex traders are also advised to closely follow statements coming from U.S. President Barack Obama and the U.S. Federal Reserve, as the forex market is likely to be very volatile to this.
JPY - Yen Plummets as Economy Improves
The Yen plummeted yesterday against its major currency pairs as the current economic recession in the world's second largest economy seems to be bottoming out. The JPY slid over 60 pips Yen to 97.54 Yen per Dollar as the Yen's demise was compounded by strong U.S. consumer confidence figures. Thus the most safe-haven currency as of late plummeted as a result of both improvements in Japan and America's economy. The JPY also slid against the EUR, dropping a massive 210 pips to finish the day's trading at 129.90. The Pound also made inroads into the JPY as the confidence of the U.S. equity markets swept Europe, and reduced demand for the safe-haven JPY.
As the Japanese equity markets reopened yesterday after a bank holiday, shares soared as the global economy showed signs of bottoming out. This is following good U.S. Consumer Confidence figures from Tuesday, European Consumer Confidence figures from yesterday, and positive Japanese data releases on Wednesday. The bearish JPY yesterday was compounded by impressive factory production figures, showing their first increase in 6 months. All these factors helped pour investors away from the Yen and into the riskier equity market. Today, the Household Spending and Unemployment Rate figures are likely to help determine the JPY's strength in late trading. The USD/JPY could break the 98.00 resistance level by the end of today's trading.
Crude Oil - Jumps 4%
The price of Crude Oil ascended by $2 or 4% yesterday to $51.44 a barrel. The increase comes despite the higher-than-forecasted Crude Oil Inventories data release. Much of the black gold's bullishness was owed to the weak Dollar and optimism about a quicker than anticipated global economic recovery. Data coming from the U.S., Japan, China, and the Euro-Zone in the last 2 days helped bring back investors confidence into the equity and commodity markets
As a result of the renewed optimism, investors decided to return to the Crude Oil market. Moreover, the weaker Dollar added to the effects of Crude's gains on Wednesday. What we will now have to see is can Oil maintain this bullish momentum? Maybe in the medium-term this may be possible. However, in the short-term high Oil prices are less likely, especially as the U.S. is expected to release poor Unemployment Claims data later on today. Traders may look for profit taking after yesterday's bullish trading session. Crude could drop back to the $50.50 mark.
Article Source - Dollar Tumbles as Investors Turn to Riskier Assets
What is Forex?
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.
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Good luck to everyone!