4.24.2009

Dollar, Yen And Risk Appetite Await G20 Meeting And US GDP

• Dollar, Yen And Risk Appetite Await G20 Meeting And US GDP
• Do Better Than Expected Earnings Signal A Turn For The Economy?
• Where Will Optimism Develop Without Confirmation Of A Recovery?

Market sentiment has stabilized over the past week as traders wait for fundamentals to either catch up to optimism or draw the budding recovery to a grinding halt. Ongoing earnings releases, first quarter growth reports from the world’s largest economies and a series of meetings attended by global policy makers can decide the fate of growth and optimism for months to come. Heading into this pervasive fundamental wave, traders from all asset classes have taken to caution. Reflecting the more speculative side of the market, the benchmark Dow Jones Industrial Average has curbed its most aggressive rally in two years. On the other side of the coin, interest in Treasuries has recovered while risk premiums through credit default swaps and other financially sensitive securities have curtailed their slow improvement. Unsurpassed liquidity makes the currency market the most discerning gauge of risk appetite versus risk aversion though. The Carry Index has extended the timid decline that began at the beginning of this month. However, looking beneath the surface of this complex measure, panic is further subsiding while expectations for returns slacken. Volatility for the broader currency is the lowest it has been since before the October market crash and credit seizure (despite the presence of event risk). In contrast, the scales of risk/reward have been balanced by shrinking yield forecasts (the interest rate outlook) and souring expectations for capital returns (risk reversals).

A sort of equilibrium has been struck between the potential for limited rates of return and the fading sense of fear that has encouraged reinvestment into the speculative areas of the market. However, as we have said many times before, this should not be considered a genuine recovery. Rather than a reduced pace of recession, a natural return to optimism and sentiment must come from positive forecasts for economic activity rather than a diminished pace of contraction. The round of event risk scheduled over the coming weeks provides the most comprehensive measure for health that we have been presented in months. The most pressing burden on sentiment are the gatherings of policy officials in Washington DC. On Friday, the G7 and G20 will convene; but the topics for discussion are not certain. The most meaningful outcome to the gathering of finance ministers would be a list of definitive steps and responsibilities aimed at turning individual and national rescue plans into a global one. This was the aim of the last summit in London; but so far, there has been little in the way of remarkable progress towards this goal. Whereas government policies for economic and financial aid support risk and reward equally, earnings activity and scheduled GDP releases will impact one or the other. The UK and US growth reports have obvious implications; but the accounting data is a more nuanced measure of risk through delinquencies and writedowns.

Written by John Kicklighter, Currency Strategist
Article Source - Dollar, Yen And Risk Appetite Await G20 Meeting And US GDP
Dollar, Yen And Risk Appetite Await G20 Meeting And US GDPSocialTwist 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!