Unexpected Good News From the US

An unexpected increase in the number of home sales and stimulus measures taken by the US government caused the US dollar to fall as investors assumed more risk taking. Stock markets were up on Tuesday and Forex markets reacted quickly as Forex traders took advantage of new Forex opportunities and dumped the Dollar and Yen.

Rising Equities Fuel Forex Opportunity

Andrew Busch of BMO Capital Markets had this to say, “If we have stabilization in the equity markets, then the fear that caused people to buy U.S. dollars as a safe-haven goes away.” In New York the ICE Futures U.S. dollar index, which measures the Dollar against major currencies fell 1.4% to 84.872 DXY and investors took advantage of newly created Forex opportunities. Mr. Busch also stated, “I’m seeing stabilization in the equity markets and it has to do with the much better-than-expected pending home sales. This is consistent with what we saw with existing home sales and it comes on the heels of a better-than-expected ISM manufacturing number yesterday.”

Stocks Up

US stock markets reacted positively to the news that a group of Republican Senators are offering a $445 billion alternative stimulus plan. The troubled Euro rose 1.5% against the Dollar $1.3038 and the Dollar fell 0.2% against the Yen to 89.29. A return to risk appetite means that Forex brokers will be seeking out newly created Forex opportunities. Speaking about the effects of risk aversion on the Dollar Matt Esteve of Tempus Consulting said, “Euro/dollar has been trading on the back of risk aversion and sentiment in the past couple of days. Any news that brings risk aversion lower and helps lift stocks at this point will hurt the dollar.”

Pending Home Sales Rebound

Pending home sales in the US rebounded in December as prospective home buyers took advantage of lower interest rates and depressed home prices. The news was surprising amid massive job losses in the US and a troubled economy. The Euro rose slightly but any Forex opportunities were mitigated by concerns about rate cuts by the European Central Bank.

Slight Return to Risk Appetite

Good news has been rare and a return to risk appetite, no matter how slight, is always welcome. Many traders will be taking of increased Forex investment opportunity offered by changing conditions.

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