Stocks Rise Despite Figures

Defying conventional logic stocks rose on Friday despite dismal employment figures released by the US government. The report detailing the deterioration of the US labor market raised expectations that the government will pass the stimulus plan proposed by the Obama administration. Figures showed that 598,000 jobs were lost in January, the largest loss since 1971. A slight return to risk appetite has increased Forex investment opportunities in currency markets.

Return to Risk Appetite

Rising stocks signaled a return to risk appetite and increased the Forex investment opportunities provided by higher yielding currencies such as the Australian and New Zealand dollars. Lending rates in Japan are 0.1% as opposed to 3.5% in New Zealand. The Bank of England cut rates to a historic low of 1% on Thursday, the lowest in 300 years. The European Central Bank did not cut rates as expected but indicated that rates may be cut in March. European data showed that German industrial output fell by 4.6% in December, a larger than expected increase.

Waiting On Washington

All eyes are on the US as legislators struggle to pass a stimulus package. Congressional Republicans have expressed ideological opposition to the bailout plan while the Obama administration says it is needed to avoid an economic catastrophe. Forex opportunities may still be found despite the dismal figures from both sides of the Atlantic. Gregory Salvaggio of Tempus Consulting stated, “Looking beyond today’s terrible figures, everybody now expects the president’s rescue plan to pass and pass fast. That is helping lift stocks and is taking some risk off the table, which in turn leads the market to sell yen and buy back some dollars.”

Risk aversion and risk appetite have been doing a juggling act, going back and forth almost daily. Despite market conditions currency markets still provide Forex opportunities to traders and investors.