USD - U.S Retail Sales on Tap
The dollar fell yesterday to a 4-month low against most of its major currencies, as growing optimism about the global economy boosted investors' risk appetite and curbed demand for the U.S. currency as a safe haven. The greenback hit a seven week low against the EUR above 1.37 level, and a four-month low against the sterling as the pair closed around 1.5290.
Yesterday, government reports showed that the U.S. trade gap widened in March for the first time in eight months, as oil imports jumped and weak overseas demand took a bite out of exports. Both U.S. imports and exports have fallen sharply since last year, as the global finance crisis has tightened credit and caused consumers and businesses to cut spending. However, in a sign the U.S. economy could be nearing a turnaround, imports declined at a slower rate, down 1% in March compared with a 5% drop in February and even bigger declines in some preceding months.
Looking ahead to today, there are several important news releases coming out of the U.S. These include the Retail Sales and Crude Oil inventories at 12.30 GMT and 14:30 GMT respectively. Better-than-expected results may help the Dollar recover some of yesterday's losses against some of its crosses such as the EUR and GBP. On the other hand, if the results turn out to be lower than forecasts, then the Dollar may record a fairly bearish session in today's trading. Traders should pay close attention to the market as there is an opportunity for traders to capitalize on the fluctuations which are likely to follow these releases.
EUR - The EUR Continues to Strengthen against the USD
The 16 nation currency extended gains against the dollar yesterday after the European Central Bank Governing Council member Axel Weber said there is no need for the ECB to buy further private assets to support lending. Yesterday, the EUR hit a seven week high against the dollar reaching above 1.37.
European countries should improve coordination of economic stimulus plans and go further in integrating financial regulation than they are now considering, the International Monetary Fund said. The IMF advice comes the day after data showed industrial production in France and Italy fell more than economists forecast, indicating that European growth may have suffered more than expected in the first quarter. In addition, the European Central Bank last week cut its benchmark interest rate to a record low 1% and President Jean- Claude Trichet indicated borrowing costs could go lower. Trichet said the ECB would also buy as much as 60 billion euros ($80 billion) of covered bonds, effectively printing money to reflate the economy.
Looking ahead to today, the most important economic indicator scheduled to be released from the Euro-Zone is the Industrial Production at 9:00 GMT. Analysts are forecasting this figure to increase from its previous reading. Traders will be paying close attention to today's announcement as a stronger than expected result may continue to bolster the EUR in the short-term.
JPY - JPY Makes Big Gains on Dollar, EUR
The Japanese yen strengthened against most of its major currencies yesterday as a slump in stock prices due to increased profit taking reduced demand for higher-yielding and riskier assets. The yen climbed to multi-day highs against its major counterparts. The JPY ended yesterday's trading up at 96.15 against the USD, and has continued to hold these gains through today's early trading hours.
Japan's current-account surplus narrowed for a second month in March as exports tumbled amid the global recession. Any revival of demand for the country's cars and electronics may be slow, even after the drop in shipments to the U.S. and China, Japan's two largest markets, eased in March. The International Monetary Fund (IMF) says the global recession will be deeper and the recovery slower than earlier predicted as financial markets take longer to stabilize.
It will be interesting to see how the local Japanese data will interact with equity market movement for the rest of the week in relation to the JPY's recent behavior.
Crude Oil - Oil Prices Hit 6-Month High
Crude oil prices yesterday rose to more than $60 a barrel, their highest level in six months, on hopes that the world economy would soon bounce back and demand for oil may recover. Oil had risen in response to a global rebound in stocks. Weakness in the dollar had also spurred the oil price, which tends to rise when the dollar falls.
The Organization of Petroleum Exporting Countries (OPEC) isn't expected to take any actions to upset current prices when it meets later this month in Vienna. Oil prices are likely to remain below the $75 a barrel price targeted by Saudi Arabia, OPEC's dominant member. Most observers believe the cartel is wary of letting prices rise too quickly for fear it would imperil an economic recovery.
Article Source - Dollar tumbles to a 4 month low
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
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)
What is Forex?
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 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.
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!