5.13.2009

British Pound in Play with Central Bank to Announce Growth, Inflation Forecasts (Euro Open)

The British Pound my see volatility in the upcoming session with the Bank of England’s Quarterly Inflation Report likely to see downward revisions to GDP and inflation estimates. Euro Zone Industrial Production is also on tap, with expectations calling for the fourth consecutive double-digit decline in March.

Key Overnight Developments

• Japan's Annual Current Account Surplus Down 48.8% on Export Weakness
• Eco Watchers Survey Shows Japan’s Merchant Sentiment Highest in a Year

Critical Levels



The Euro started off strong in Asian trading, testing as high as 1.3722 but slipping back for a more modest 0.2% net gain ahead of the opening bell in Europe. The British Pound trended higher, adding as much as 0.3% against the US Dollar.

Asia Session Highlights



Japan’s Current Account surplus grew more than economists expected in March, printing at 1.48 trillion yen from 1.12 trillion in the previous month as compared to forecasts for a 1.21 trillion result. In annual terms, the surplus shrank -48.8% from a year before, the smallest drop in 5 months. Still, exports tumbled -46.5% in the 12 months from March 2008 on continued weakness in demand for the island nation’s cars and electronics. Looking ahead, the road back promises to be a long one: the International Monetary Fund (IMF) has forecast that the world economy will contract by -1.3% this year while global trade volume (including both goods and services) will shrink by a whopping -11%; further, expectations for the recovery in 2010 are noticeably muted, calling for output to expand 1.9% and trade volume to add just 0.6%. This means that even if we assume that Japan has seen the bottom in overseas sales, firms will need to contend with substantially lower output levels for some time to come. The manufacturing sector employs over 27% of Japan’s labor force, implying that the jobless rate is likely to remain high for the time being to keep a lid on a robust recovery in consumption and overall economic growth.

The Eco Watchers Survey of merchant sentiment saw respondent’s view on current market conditions rise to the highest since a year before while the future outlook gauge surged to the highest since October 2007. The survey is based on questionnaires from sectors that are particularly vulnerable to turns in the business cycle such as retail, restaurant service, and taxi driving. Importantly, the readings remain below the 50 “boom/bust” level, suggesting the data continues to point to economic contraction, albeit at a slower pace. Rising stock prices and a robust government stimulus plan may have helped boost sentiment: the Nikkei has rallied 18.4% over the past two months; meanwhile, Prime Minister Taro Aso has pushed through a record-large spending package.

Euro Session: What to Expect



The Bank of England’s Quarterly Inflation Report tops the economic calendar in European hours. The release is likely to reflect an outlook that encouraged policymakers expand credit easing measures with downward revisions to GDP and inflation estimates. The fallout in the industrial sector, which employs close to 20% of the UK labor force, is likely to keep a lid on a robust recovery as lackluster overseas sales of British manufactured goods have companies stick to lower output levels, keeping unemployment at elevated levels. Indeed, yesterday saw industrial production fell by a record -12.4% in the year to March while the jobless rate surged to an 11-year high at 4.7%. Grim labor market conditions will undermine fiscal and monetary efforts to reboot economic growth, weighing on consumption and thereby total output by trimming disposable incomes among the unemployed and encouraging precautionary saving among those still working. A survey of economists conducted by Bloomberg calls for the UK economy to shrink -3.7% this year while the International Monetary Fund calls for a -4.1% contraction.

Turning to the Euro Zone, Industrial Production is expected to have lost -17.6% in the year to March, the fourth consecutive month of double digit declines. Output has dwindled as the global economic downturn weighed on overseas demand. Exports contribute over 40% to the Euro Zone’s overall economic growth, with other factors like investment and private consumption indirectly linked to foreign demand. The current fallout has led companies to scale back investment and cut labor costs, boosting unemployment and weighing on consumption. This bolsters expectations that the currency bloc will trail the US in recovering from current turmoil: most US economic growth is derived from domestic factors, while the Euro region will need to wait for the second-round effects of a recovery among its top trading partners to see a lasting return to positive growth.

Written by Ilya Spivak, Currency Analyst
Article Source - British Pound in Play with Central Bank to Announce Growth, Inflation Forecasts (Euro Open)
British Pound in Play with Central Bank to Announce Growth, Inflation Forecasts (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!