Investors Sell Euros

The US dollar gained early in 2009 as investors sold Euros after data showed a deepening recession in the Euro Zone. Forex investors and traders also realized that the Euros gains in November were unsustainable. Low trading volumes during the holidays also affected currency markets and the Forex opportunities they normally provide. Dustin Reid, director of Forex strategy at RBS Global Banking & Markets stated, “Indeed markets are thin as many are opting to take today off. “As a consequence, we will not likely see full liquidity back into markets until next week or possibly even the week after.”

Eurozone Manufacturing at 11 Year Low

Euro Zone manufacturing activity fell to an eleven year low which was well below market forecasts. Recently investors have taken advantage of the Forex opportunities offered by the Euro as the US Federal Reserve cut interest rates to near zero, while the European Central Bank has adopted a more gradual approach to cutting interest rates.

Daragh Maher, currency strategist at Calyon in London stated, “Currency markets will struggle to balance the Euro’s upside from interest rates not being cut aggressively with the concern that the economy is destined for a sharp deterioration on the back of this measured policy reaction.”

Pound Falls Further

The Pound fell after data revealed a dismal image of the economy in the UK. Recently the Pound had cone close to parity with the troubled Euro. British mortgage approvals fell to record lows in November and a survey conducted by the Bank of England said that credit conditions will tighten over the next three months. Home prices also declined 2.2% in December.

Dollar Still Offers Safe Haven

Many investors are once again taking advantage of the Forex opportunities and safe haven offered by the US dollar. Market activity is traditionally slow during the holiday season and it is expected that markets will return to normal activity this week.