USD - USD Plummets as Stock Markets Rally
The Dollar dropped against most of its major currency counterparts yesterday as a rally in global stock markets diminished demand for the safety of the U.S currency. The Dollar traded at $1.4108 per EUR after sliding 1% yesterday and reaching a day's low of $1.4135, the weakest level since July 2nd. However the USD was up against the Yen trading at 94.36 from 93.39 late Tuesday.
Better than expected results from the New York Manufacturing Index and as expected results from the Consumer Price Index (CPI) which were released Wednesday put further pressure on the Dollar. However the major mover in the market Wednesday were the equity markets, with U.S stocks rallying sharply following the release of better than expected 2nd quarter earnings from Intel.
It is likely that earnings results will continue to dominate market movements in the following days as the earnings from J.P. Morgan Chase, Citigroup and Bank of America are due later this week. Traders should also follow the release of the Unemployment Claims, TIC Long Term Purchases and the Philly Fed Manufacturing Index to be released today at 12:30 GMT, 13:00 GMT and 14:00 GMT respectively as these results may either strengthen or reverse the current bearish sentiment on the Dollar.
EUR - EUR Gains on Renewed Market Optimism
Benefiting from the return of risk appetite and gains in equities the EUR traded at $1.4112 versus the USD, up from $1.3935 late Tuesday. The EUR was also up against the Yen trading at 133.12 up from 130.14 yesterday. The British pound jumped to $1.6425 against the USD from $1.6270 Tuesday.
The EUR was little changed after a report showed Annual Consumer Price Inflation in the Euro-Zone fell 0.1% in June, marking negative inflation in the region for the first time since its creation. The British Pound rose 0.6% versus the Dollar following gains in financial sector stocks. The Pound was little affected by the overall pessimistic economic data released Wednesday from the U.K. The data showed the number of people claiming jobless benefits in June rose at its slowest pace in more than a year; however the overall unemployment rate rose to its highest level since January 1997.
With no major news due to be released today from Europe, traders should follow the data to be released from the U.S as these will have great affect on any USD currency crosses. Furthermore, traders should follow closely the continuing release of the corporate earning reports as they will continue to be the driving force behind the movement in equity markets and consequently the demand for riskier currencies such as the EUR and GBP.
JPY - The Yen Slides as Investors Move to Riskier Assets
The Yen slid against the EUR, trading at 133.01 per EUR after declining as much as 2.1% in its largest intraday loss since May. The Yen was also down 0.8% against the USD trading at $94.25. The drop followed a report that showed U.S. industrial production for June fell less than forecasted and Intel Corp.'s second quarter earnings were higher than estimated.
The JPY experienced a phenomenal rally these past two weeks as investors retuned to the safety of the Japanese currency following the release of poor U.S employment data. However, this rally was snapped Monday with a better than expected start to the 2nd quarter earnings season. The positive earnings reports from Goldman Sachs and Intel rekindled risk appetite among investors diminishing demand for the safe haven Yen and in turn pushing them to riskier, higher yielding currencies. With stock markets continuing to rally it is likely the JPY will extend its losses during today's trading as well.
OIL - Oil Prices Rise as U.S stockpiles Fall
Crude Oil continues to climb as stock markets rally and U.S Crude Oil Inventories showed a larger than expected decline. Crude oil for August delivery rose as much as 47 cents or 0.8% to $62.01 a barrel Wednesday. The weak Dollar and huge rally in the stock market following the release of Intel's forecast sales helped boost Oil prices. Crude inventories fell by 2.81 million barrels vs. the expected 2.1million and refineries are operating at 87.9%, the highest since August. However demand is still weak and so it is unlikely Oil prices will reach $70 a barrel again in the short term and it is likely to remain in the $60-$65 range.
Article Source - Crude Rises the Most in 3 Weeks
Key Overnight Developments
• NZD Tumbles as Fitch Downgrades Credit Outlook to ‘Negative’
• New Zealand Consumer Prices Fall to Lowest in Nearly 2 Years
• NZ Manufacturing Continues to Stabilize as New Orders Gain
• Japanese Service Demand Unexpectedly Drops on Job Losses
The Euro fell in overnight trading, losing as much as -0.3% to the US dollar. The British Pound followed suit, shedding -0.4% against the greenback to test as low as 1.6379.
Asia Session Highlights
New Zealand’s Consumer Price Index declined less than economists expected in the second quarter, with the annual inflation rate falling to 1.9%, the lowest since the three months ending September 2007. Forecasts were pointing to a 1.8% result ahead of the release. Transportation and transport supply costs led the drop, -6.6% and -9.5% from a year before. Lower fuel prices and cheaper airfares were likely behind the drop-off: gasoline prices fell 17% from a year before while the average cost of air travel tumbled 21% in the same period as companies slashed prices to entice consumers amid the global recession. The Reserve Bank of New Zealand has said that they expect inflation to fall below the 1-3% target range this year but return to desirable levels by early 2010. RBNZ Governor Alan Bollard added this week that New Zealand is likely to recover faster than its main trading partners from the current downturn, boosting expectations that the central bank will begin raising interest rates sooner rather than later. Indeed, overnight index swaps now show the market is pricing in 79 basis points in tightening over the next 12 months, second only to the Federal Reserve that is seen hiking rates by 82bps over the same time frame.
Separately, the Business NZ Performance of Manufacturing measure rose to 46.2 in June from 43.1 in the previous month. The result suggests the sector continues to shrink, albeit at the slowest pace in 9 months. New Orders led the metric higher, expanding for the first time since April 2008. In annual percentage terms, new orders and output saw positive growth for the first time in at least 7 months. Manufacturing figures have been stabilizing in most industrial countries in recent months as producers adjust inventories to current demand levels; it remains to be seen if this process will translate into a sustainable recovery going forward.
Japan’s Tertiary Index surprised to the downside, showing service demand shrank -0.1% in May versus expectations for a 0.4% gain. It seems job losses are starting to catch up with the world’s second largest economy even as the effects of the government’s massive 25 trillion yen fiscal package continue to be digested. Consumption is likely to remain lackluster as the unemployment rate continues to climb, weighing on overall economic growth and holding back recovery from the worst Japanese recession since World War II. Yesterday, the Bank of Japan slashed its GDP growth forecast for the 2009 fiscal year and said consumer demand “remains generally weak.”
The New Zealand Dollar tumbled 50 pips in a mere 15 minutes late into Asian trading as Fitch cut its long-term credit outlook for the smaller antipodean nation to “negative” from “stable”. The ratings agency expressed concern over New Zealand’s medium-term growth outlook given its “persistently large current account deficit and rising foreign indebtedness”. Fitch warned that the government may need to implement a “stronger fiscal adjustment” after Prime Minister John Key cancelled tax cut plans on fears of the ballooning public deficit. Fitch Asia Pacific Director Ai Ling Ngiam said New Zealand could “fall into a low growth trap”, an allusion to Japan’s infamous “lost decade” of stagnant economic performance. Fitch added that the volatility of the New Zealand Dollar complicates the necessary adjustments, with the currency “more responsive to global financial conditions than to domestic economic fundamentals.”
Euro Session: What to Expect
The economic calendar looks tame in European hours, with the July edition of Switzerland’s ZEW Survey of analyst sentiment the only notably item on the docket. The metric rebounded sharply in June, registering the first positive reading in close to three years. The forward-looking bias of the survey’s respondents tends to see it lead actual trend changes in the exchange rate, however, so a meaningful near-term impact is unlikely barring a wild deviation from recent figures once the data crosses the wires.
On balance, forex price action is likely to fall in with risk trends once again as earnings season continues, with notable reports due from: Carrefour SA, Europe’s largest retailer; Novartis AG, Europe’s second-largest pharmaceutical firm; Accor SA, Europe’s top hotel company; and SAP AG, the world’s biggest computer services provider.
Written by Ilya Spivak, Currency Analyst
Article Source - New Zealand Dollar Tumbles as Fitch Downgrades Credit Outlook to a 'Negative' (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!