6.11.2009

Euro Weakness Looms on Latvia Currency Crisis, EU Regulation Scheme (Euro Open)

The Euro looks increasingly vulnerable as on looming contagion from an increasingly likely currency crisis in Latvia as well as the introduction of a controversial EU-wide financial regulation scheme that could stir a backlash against the ECB across the region. The central bank is also set to release June’s edition of their Monthly Report.

Key Overnight Developments

• Japan’s GDP Shrank At Record Annual Rate in The First Quarter
• Australia’s Labor Market Worse Than Headline Data Would Suggest

Critical Levels



The Euro advanced in overnight trading, adding as much as 0.5% against the US Dollar. The British Pound followed suit, rising 0.4% against the greenback.

Asia Session Highlights



The Australian Dollar surged in overnight on news that the economy shed just -1.7k jobs in May versus expectations of a -30k decline. Looking at the details of the report, however, the labor market does not seem nearly as healthy as the headline figure would suggest. The economy actually lost 26.2k full-time jobs while gaining 24.5k part-time positions, a shift that implies shorter working hours and lower wages, darkening the outlook for spending. Although consumer confidence jumped higher in June, the result likely owed to the Prime Minister Kevin Rudd’s generous stimulus measures and sentiment may reverse course going forward as the flow of government cash dries up. The Unemployment Rate jumped to 5.7% as expected, reversing the April’s improvement to 5.5% and returning to the 5-year high registered in March. Economists polled by Bloomberg expect the jobless rate to continue to rise for the foreseeable future to top 7% by the first half of next year. If this indeed proves to be the case, Australia’s heretofore much-lauded ability to outperform other industrial economies may falter.

The final revision of Japan’s first-quarter Gross Domestic Product showed the economy contracted less than initially estimates suggested, shrinking -3.8% versus -4.0% expected. Still, the annual pace of decline continued to accelerate, printing at -14.2% from -13.5% in the three months to December 2008, setting a fresh record low. While the pace of decline may moderate in the coming months as firms replenish depleted inventories, the dismal outlook for global demand in the foreseeable future will mean that a robust recovery will remain elusive for the time being as output and employment levels remain at the lower end of the spectrum. Indeed, the current account surplus shrank more than expected in April as overseas sales tumbled -40.6%.

Euro Session: What to Expect



June’s edition of the European Central Bank Monthly Report is the only item of significance on the economic calendar for the upcoming session. The document is unlikely to offer much by way of new insight beyond what was revealed at the last monetary policy meeting. Other factors may stir Euro volatility however, as a proposed EU-wide financial regulation scheme threatens to stoke a backlash against the ECB while a currency crisis continues to loom in Latvia, warning of potential contagion. A failed bond auction has seen the Balkan country scramble to cobble together an IMF-backed rescue package to avoid a massive depreciation of the local currency. Western European banks are heavily invested in Latvia as well as neighboring Lithuania and Estonia; if the currency collapses, the value of Western European investments in the region will go with it, putting intense strain on lenders already battered by losses from the subprime crisis. Needless to say, such a scenario could weigh heavily on the Euro as traders seek to distance themselves from the turmoil.

Written by Ilya Spivak, Currency Analyst
Article Source - Euro Weakness Looms on Latvia Currency Crisis, EU Regulation Scheme (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!