9.07.2009

G20 Pledges to Coordinate Stimulus Exit Plans to Limit Market Volatility (Euro Open)

Finance ministers and central bankers from the G20 nations pledged to coordinate plans to exit expansionary fiscal and monetary policies in a bid to limit destabilizing volatility in the interest rate and currency markets at a summit in London, but cooperation looks less likely as the economy improves.

Key Overnight Developments

• New Zealand House Prices Rose for Fourth Month in August, Says QV
• G20 Pledges to Coordinate Stimulus Exit Plans to Limit Market Volatility
• Euro, British Pound Diverge Against US Dollar in Overnight Trading

Critical Levels



The Euro traded higher to start the trading week, adding as much as 0.3% against the US Dollar. The British Pound diverged from the single currency, slipping downward to test as low as 1.6366 against the greenback.

Asia Session Highlights



New Zealand’s House Prices advanced for the fourth consecutive month, adding 0.7% through August according to Quotable Value (QV), a government valuation agency. In annual terms, prices fell -2.8% from a year before, the smallest decline in 13 months. QV valuation manager Glenda Whitehead said that, “The housing market is strongly driven by confidence and that appears to be returning.” Indeed, Westpac’s measure of consumer sentiment rose to the highest since the fourth quarter of 2007 in the three months through June. Rising home values may create a perception of growing wealth among property owners, helping to boost consumer spending and by extension spur overall economic growth. New Zealand Finance Minister Bill English has said the economy will begin to expand again in the second half of this year. On balance, however, this may prove of little help to the New Zealand Dollar considering the central bank has pledged to keep interest rates low for now, saying they will remain “at or below current levels” until the latter part of 2010.

Finance ministers and central bankers from the Group of 20 nations (G20) concluded a summit in London with a pledge to keep expansionary fiscal and monetary policy in place for as long as need be to ensure the durability of the nascent economic rebound that has been seen over recent months. Most critically, policymakers agreed to some global coordination as countries eventually begin to unwind stimulus measures to limit volatility in interest rate and foreign exchange markets. However, building consensus on such issues as bank regulation and executive compensation is already proving difficult in the absence of imminent economic meltdown, and agreeing on a coordinated plan to withdrawing stimulus seems like it will be more daunting still, threatening sharp swings in government bond yields and the corresponding currencies.

Euro Session: What to Expect



The Euro Zone Sentix Investor Confidence indicator is expected to print at -13.7 in September, showing pessimists outnumber optimists by the narrowest margin since in 14 months. The metric hit a record low in March and has tracked European equities higher ever since, now showing a hefty 92.3% correlation with a Morgan Stanley index reflecting the average performance of EZ-based stock exchanges. Interestingly, it appears that the formation of major tops and bottoms in equities have preceded similar developments in the Sentix by about one month, meaning price action had shaped investors’ outlook as presented in the survey rather than the other way around. To that effect, it would appear that the reading offers little insight into the future direction of risk appetite and so is unlikely to make a lasting impression on currency markets.

Written by Ilya Spivak, Currency Analyst
Article Source - G20 Pledges to Coordinate Stimulus Exit Plans to Limit Market Volatility (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!