Euro-Zone Economic Contraction Set to Ease (Euro Open)

The growth rate of the Euro-Zone economy will be highly watched tomorrow and is likely to shake markets if the published number deviates from expectations. Contractionary conditions might not actually be as bad as originally thought after Spain, the country with the worst jobless rate, had to revise its unemployment rate down.

Key Overnight Developments

• Australian Inflation Expectations Highest Since October
• Moody’s Holds ‘Negative’ Outlook on N.Z. Banks
• Wages in Australia Grow at 4-Year High

Critical Levels

Sterling price action against the Dollar consolidated during Asian trading after having touched both our identified support and resistance levels. The Euro played it similarly and even broke through pivot support for a brief moment before continuing up toward our ceiling at 1.4161, coming only 29 pips shy.

Asia Session Highlights

A Moody's research article continued to hold a "negative" outlook for New Zealand’s banking system. "Impairment levels have risen noticeably so far in fiscal 2009...thereby reducing net profit growth and internal capital generation capabilities" said Marina Ip, assistant vice president at Moody's Australia. The unwanted news comes just four weeks after Fitch, another major ratings agency, slashed New Zealand's sovereign debt-rating outlook to "negative." In that report, the agency cited the high level of dependence that the country has on short-term financing from abroad as reason for the caution. The credit outlook for both the public and private sectors in New Zealand remains weak. Yields are likely to remain high. On Monday, the country's 10-year government bond yield rose to the highest level since the end of June. Such tight-money conditions might make it tough for the country to grow organically.

Australians expect the highest level of inflation since October, after gasoline rose to $1.50 per liter, or $6.40 per gallon and average weekly wages grew at the greatest pace since August 2005. Although it is true that an upward trend in the rate of wage growth may lead to a general rise in consumer prices, the anticipated 3.5% inflation rate might not necessarily become a realized threat. The 6.1% growth in pay through May substantially overshot forecasts, which called for figure to rise by only 5.3%. On one hand, this startling trend may induce wage-led inflation. On the other, it may not. The data does not include the wages of part-time workers. Keep in mind that since last summer, the number of full-time positions that were lost was replaced by almost the same amount of part-time ones created. This means that since the data only represents those who are working complete shifts it does not get weighed down by the downward wage pressure generally thrust upon part-timers. But the public does have some reason to believe the price of living will jump ahead. At its latest meeting, the RBA revised its growth forecast for 2009 significantly upward. The bank actually believes that their economy will expand by 0.5% - quite a stark difference from the 1.0% contraction which they had originally anticipated. It will be a tough call to predict. But in the mean time wages of all workers might continue to slow in gains, easing the pressure on overall inflation.

Euro Session: What to Expect

The economies of Germany, France and, more importantly, the Euro-Zone are expected to have continued shrinking during the second quarter of 2009. Contraction rates for each area are, however, clearly expected to fair better than the period prior. Such optimism may be coming on the back of a lagged monetary transmission system, which saw the European Central Bank slash it’s overnight policy rate by 2.75 percentage points in the six months leading up to March and another half-point in May. The ECB also took unprecedented action last month when it injected 442.2 billion Euros into the zone’s banking system. These stimulative efforts, aimed at kickstarting the economy or at least at easing the pain, may have done just that – at least in the final part of the period. June saw the Euro-Zone unemployment rate actually come in 0.3 percentage points under expectations to 9.4% and the May figure revised down 0.2 percentage points to 9.2%. Much of this June error came after Spain, the Euro-Zone country with the largest amount of job losses in the last year, revised their rate of unemployment downward. Some of this liquidity easing must be trickling down if even the country with the weakest labor market finds itself doing better than initially expected. While the joblessness situation does seem to be softening, the Euro-Zone economy probably continued to decline – but only at a slower pace than many may be expecting, it may seem.

Switzerland’s June Producer and Import Prices are expected top have risen by the largest monthly amount since July 2008. With the trade-weighted Franc exchange rate in May falling by the largest percentage amount since January, it may come to be that the country’s import prices will be reflected by such deterioration in the Swiss purchasing power abroad. On the contrary, trade data for June showed that the nominal value of imports rose by 2.5% while the real value rose even more, by 3.8%. In any case where the real value of a price variable exceeds that of the nominal one it is because the cost declined.

Written by Luis Gil, DailyFX Research
Article Source - Euro-Zone Economic Contraction Set to Ease (Euro Open)
Euro-Zone Economic Contraction Set to Ease (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.


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!