Deflation, Not Inflation, Might Dominate Headlines Tomorrow (Euro Open)

Euro-Zone Consumer Prices might actually come in less than the consensus forecast of 0.2%. A deflationary figure may be a reality after Germany, the 16-nation bloc’s largest economy, saw its own respective consumer price number publish 0.2 percentage points lower than the surveyed expectation. Jeane-Claude Trichet and his European Central Bank may be pressured to act more aggressively if a deflationary figure alerts

Key Overnight Developments

• Japanese Unemployment Hits 5.5 Year High
• Japan’s Industrial Production Jumps By Most in Six Years

Critical Levels

Euro price action traded to pivot resistance before heading back down, but failed to break the 1.39 mark. Sterling confined itself to the upper 1.59 mark, showing topping-out characteristics that could see the Dollar move ahead at the start of next week’s trading.

Asia Session Highlights

The price of Japanese Consumer Goods fell for a third straight month in April, by 0.1%, which was better than economists had forecast. March also saw the figure fell by 0.1%. Retail Sales may have contributed to the fact that the CPI number did not accelerate in a negative direction. In fact, data for April showed that consumer increased their appetite by 0.6% after having plummeted 1.1% in the month prior. This upward pressure on prices might not hold steady in future months if the island economy continues to dwindle.

Japan's Jobless Rate rose by to the highest level since late-2003, by 0.2 percentage points to 5.0% in April. In line with expectations, the figure rose as the economy continued to drag the labor market down. The much watched jobs-applicant ratio tanked to a 10-year low of 0.46 from 0.52. In a sign that workers might be turning a bit optimistic, the number of new applicants as a percentage of the total work force rose a tick to 0.77%. This coincides with the nation's consumer confidence number, which rose to 33.2 in April, from 29.6 in the month prior.

Japan's Industrial Production in April soared by the most in at least six years, when the data first began being compiled. Indeed, the key metric, rose 5.2% in the month after economists had forecast it to rise by only 3.3%. The 12 months through the end of this period saw such production fall 31.2%.

Australia’s Private Sector Credit, the amount that banks loan to business and consumers, rose by 0.1% in April from the month prior. The steady increase may be as a result of a monetary policy reluctant to continue a rate-cutting campaign.

Euro Session: What to Expect

Euro-Zone Consumer Prices are expected to to have risen only 0.2% in the year through the end of May. If Germany, the zone’s largest economy, is of any indication, CPI data might actually come in lower than the surveyed figure. Germany’s inflation rate underscored estimates by 0.2 percentage points and may see its own data heavily weigh on the broader Euro-Zone’s published number. Just yesterday we saw that the Unemployment Change number came in significantly under that which was surveyed. At only 1,000 new jobs created, as opposed to the expected 64,000, the upward pressure that would normally be felt on the price of goods might not actually be completely there. Indeed, as more people are unemployed, the less cash there exists to be spent on various items included in the CPI basket.

Such developments may also lead German Retail Sales to come in largely under that which is expected. The overly optimistic 0.5% expected number might actually continue to be a negative one. But as a recent revision have shown, March’s spending data was actually not as bad as what the government had originally reported.

The Swiss KOF Leading Indicator will likely continue to be in the negative region, but may show signs of relief by reducing the rate of deterioration if not actually showing an upward tick. With the number of exports surging ahead by 8.3% in April alone, and the unemployment level rising in line with expectations by only a 0.1 percentage point we may see the Swiss economy somewhat stabilize.

Written by Luis Gil, DailyFX Research
Article Source - Deflation, Not Inflation, Might Dominate Headlines Tomorrow (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.


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.
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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!