UK Unemployment Figures at Highest Level Since 1995

The pound fell to a four month low as UK unemployment figures rose to the highest level since 1995 paring recovery hopes in the UK. The pound to euro exchange rate fell to 89.01 pence per euro. The Office for National Statistics reported that the number of people in the UK seeking employment increased by 210,000 to 2.47 million. Vincent Chaigneau of Societe Generale SA stated, “The market had a shock yesterday and the data this morning was not strong enough to reverse the trend. The data confirmed what King said yesterday, which is that we can pretty much rule out a strong recovery. It was a wake-up call for the market.”

BOE May Cut Rates

The UK unemployment rate rose to 7.9% compared with 0.5% in the Euro Zone, 9.7% in the US and 5.7% in Japan. Bank of England Governor Mervyn King told MP’s that the BOE is “looking at” cutting deposit rates to stimulate lending by financial institutions. The BOE’s next policy meeting is October 8th and investors will be watching closely.

Euro Extends Gains

On Wednesday (Sept. 16th) the euro extended recent gains against the US dollar hitting a nine month high. The euro to dollar exchange rate rose to $1.4705 rising above $1.47 for the first time since September 2008. In contrast the DXY fell to its lowest in a year to 76.262. Rising risk sentiment has put pressure on the dollar as forex traders sell the dollar in favor of higher yielding currencies. Lauren Rosborough of Westpac stated, “The general dollar-selling trend remains in place. The $1.4720-1.4750 region should be capped in the short term, but once we get into New York trade the tendency will be to push the dollar lower.”

Aussie and Kiwi Dollars Gain

On Wednesday the dollar fell to a one year low against a basket of major currencies as rising stocks and deficit concerns pared demand for the greenback. The Aussie and Kiwi dollars have been the chief beneficiaries of the demand for higher yielding assets. Both Australia and New Zealand offer significantly higher three month deposit rates than the US and Japan.

Euro Gains Broadly

Last week saw a rise in risk sentiment as investors took advantage of the forex investment opportunities provided by the Euro and other currencies. The Euro gained broadly last week trading at a high of $1.37. Many believe that the Euro will offer even more forex opportunity this week and the Euro may go as high as $1.40. The Euro gained broadly during the week but gains were pared later in the week as data showed a decline in industrial production in the Euro Zone.

Latin American Currencies Perform Well

Last week also saw forex opportunities offered by Latin American currencies. The Columbian Peso, the Mexican Peso, and the Brazilian Real all rose against the dollar. The New Zealand dollar was one of the biggest beneficiaries of the rise in risk sentiment.

Canadian Dollar Up

The Canadian dollar provided investors with forex opportunities and rose to 81.33 cents US. The weakness of the US dollar and rising oil and gold prices are credited with the Canadian dollar’s rise. Moves by the Federal Reserve were blamed for the US dollar’s fall and investors fear the Fed’s moves will cause inflation. The Fed will purchase $1 trillion dollars worth of government and mortgage backed debt.

Dollar Experiences Record Weekly Fall

The US dollar experienced its biggest fall since 1985 as investors sold the dollar in favor of the forex opportunities offered by other currencies. Investors took advantage of forex opportunities offered by the Swiss Franc last week. Earlier in the week the Swiss National Bank entered the forex market selling the Franc against the Euro and the US dollar. Gains by the Franc were pared later in the week after a bank official stated that the global recession needs more stimulus policies.

Stimulus Measures Having Effect

The ascent of some major currencies has provided many with forex investment opportunities. Many believe that the stimulus measures introduced by governments are beginning to have an effect. Most agree that stabilizing the financial sector must take place before recovery is possible. With recovery comes increased forex opportunity for all.

Risk Aversion Returns

The dollar fell slightly against the troubled Euro as investors took advantage of Forex opportunities offered by currency markets earlier in the week. Risk aversion returned to currency markets after testimony by Fed President Bernanke and remarks by Treasury Secretary Geithner failed to calm investor dears and limited Forex investment opportunities for many investors.

Obama Plan Lacks Original Ideas

Market consensus was that the $2 trillion dollar rescue plan by the Obama administration addressed key areas needed to prop up the ailing banking industry but lacked original ideas and differed little from the policies of the Bush administration. The lack of original ideas signaled a return to risk aversion as Forex brokers sought out the safe havens of the dollar, Yen, and Swiss Franc.

Geithner’s Remarks Short on Substance

Treasury Secretary Geithner’s remarks were seen as short on substance and detail and disappointed many who had been waiting for specific details on the bailout plan. Adam Fazio of CIBC World Markets stated, “People were expecting the government to come up with details on how to fix things. And it doesn’t sound that more details about the plan are forthcoming, so I think there is more risk inherent in the market.”

BOE To Take Extraordinary Measures

The Pound fell further after a bank of England report suggested that extraordinary measures are needed including monetary easing. Forex opportunities were limited by the global flight to safety on currency exchanges. Market uncertainty remains about the fate of the $838 billion stimulus package passed by the US Senate on Tuesday. Both houses now have to haggle over details of the plan causing further delay and limiting Forex opportunities.

Markets Volatile

Markets remain volatile and Forex traders and investors took advantage of the Forex opportunities earlier in the week when risk aversion eased. Markets were waiting for both Bernanke and Geithner to outline and provide details of the US bank rescue and stimulus plans. The return to risk appetite during this short period provided many Forex opportunities for investors. Markets remain uncertain and the sooner the US congress acts, the better.

Geithner and Bernanke Fail To Provide Specifics

After aslight return to risk appetite on Monday and Tuesday risk aversion returned with a vengeance after remarks by Federal Reserve President Bernanke and Treasury secretary Geithner failed to provide specifics about the rescue packages proposed for the troubled US banking sector. This, in turn, resulted in diminished Forex opportunities. The proposed bailout packages were seen as short on specifics and long on promises.

Plans Not Living Up To Expectations

The long awaited remarks from Geithner said that the US government was considering setting up a public and private fund to buy over $1 trillion dollars worth of toxic assets from banks. The plan was seen by many as fumbling by the Treasury and gave the impression that months into the financial crisis the Fed was still struggling to come up with a coherent plan. This sent many Forex traders and investors to the safe haven and Forex opportunities the Dollar and Yen provide in times of crisis. Matthew Strauss of RBC Capital expressed the thoughts of many when he stated, “Geithner’s new bailout plan did not live up to expectations, by a large margin, and his comments that the government “will have to try things we’ve never tried before” and “we will make mistakes” did not exactly instill market confidence.”

Bank Rescue Plan Disappoints

Earlier in the week the Australian and New Zealand dollars had provided Forex opportunities to many investors but the uncertainty resulting from Geithner’s remarks sent many back to the safe haven and limited forex opportunities offered by the Dollar and the Yen. The US Senate passed an $838 billion dollar stimulus package but this was overshadowed by disappointment over the bank rescue plan.

Bank of England Expected to Lower Rates

Both the House and Senate will now have to debate the details of the plan causing further delay and limiting Forex investment opportunities for many investors. In the UK the Bank of England is expected to lower its growth estimate and there is speculation that the bank may follow the Federal Reserve in cutting rates to zero and possibly adopt quantitative easing.

Risk Aversion Dominant

Risk aversion has been the dominant theme throughout the global financial crisis and has limited Forex opportunity for investors. Returns to risk appetite have been short lived but many investors have been able to snatch up what Forex opportunities were available during these short lived periods. It is becoming obvious that this crisis will take longer to fix than was once thought.

Euro in Serious Trouble

Ever since the Euro was launched in 1999 many believed that, in time, the Euro would rival the US dollar for a global reserve currency. The Euro has provided many traders and investors with many Forex opportunities since its inception. The Euro seemed poised to weather the recent economic crisis but recent data from the Euro Zone reveal a currency in trouble.

Euro Zone Economy to Contract

The Euro is faltering as the global economic crisis takes its toll on the currency and the Forex opportunities it provided seem a thing of the past. The economy of the 16-nation Euro Zone is expected to contract by 1.9 percent this year while the US economy is set to shrink by 1.5%. Many economists are expressing doubts about the currency’

s long term prospects. There is even talk of some member states quitting the Euro Zone completely.

Greece May Defualt

The immediate outlook for the Euro Zone is dismal at best. Many member states are in real financial trouble. Many predict a sovereign debt default in Greece which would require an International Monetary Fund style bailout by fellow members with harsh conditions that would jeopardize the country’s fragile political balance. Greece has amassed debts equivalent to 90% of its gross domestic product. All this has had an adverse effect on the forex investment opportunity the Euro once provided.

EU Slow To Address Crisis

The European Union’s response to the global financial crisis has been seen as behind the curve. In contrast to the United States whose Federal Reserve Bank and Treasury Department quickly moved to address the crisis, the EU and the European Central Bank have been seen as sluggish in taking action. EU members have doled out stimulus packages seen as too little too late. The Euro is under extreme pressure on currency markets and at present it’

s potential for Forex opportunities are almost nonexistent.

Economic uncertainties explain the fact that the Euro has a share of foreign-exchange reserves half as large as the US dollar. Investors are attracted to the fact that in the United States a single government agency sets fiscal policy and that U.S. bond markets are much larger and provide investors with more Forex opportunities.

EU Population Stagnant

On unnoticed factor that gives the United States an edge is the fact that the population in the US is expected to rise by at least 20 percent by 2050 while the population in the Euro Zone is stagnating. Holger Schmieding, chief economist for Europe at Bank of America in London stated, “If you have the choice between two similar economies, the one that’s growing faster on trend than the other will have the edge.” If the Euro is to survive and provide Forex opportunities it will need prudent management and more young consumers.

No ‘Obama Bounce’ in Markets

Many investors were expecting what has been called the ‘Obama bounce’ in markets. Instead the S&P fell to an inauguration day record. Actually, based on 5 decades of data the Dow fell more often than it rose on Inauguration Day. Since by and large Forex markets follow equity markets there has been a slide in major currency pairs and limited Forex opportunity.

Dollar Declines Against Yen

The dollar has risen against the Euro and British pound but it has declined against the Japanese Yen. The dollars performance reflects a flight to safety and does not reflect optimism but pessimism. Newly elected Obama inherits an economy in shambles and many think that the first 100 days of a new administration can define a presidency. Obama is expected to announce many reforms and new monetary policies that can either increase or decrease Forex opportunities.

History On Obama’s Side

Historically Stocks rose in the first 100 days of a President’s term 11 out of 16 times. Political party doesn’t really matter but of the 5 times that equities dropped in the first 100 days, 4 out of the 5 were during Republican Presidencies. The good news is that although Obama has been handed a dismal economy, history is on his side and many economists expect to be celebrating a stronger stock market after the first 100 days of his presidency. Currency markets will most likely follow suit resulting in increased Forex opportunity.

World’s Eyes on Obama

The global economic news has not been good and the world’s eyes are on Obama and the United States which is seen as very proactive in addressing the global recession. In contrast the Euro Zone and the UK are seen as behind the curve in taking necessary action to stem the growing Euro Zone recession. In his inauguration address Obama state, “Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age.”

Obama Administration to Make Economy First Priority

It is a given that the Obama administration will make the economy their first priority. A strong US economy is necessary for the function of the global economy. A smoothly functioning global economy translates into increased Forex opportunities for investors. At present all eyes are on Obama and the new administration.

Yen Falls

The Yen fell on Monday as rising stock markets helped to promote risk appetite and sent many investors in search of Forex opportunities offered by higher yielding currencies. Trade in the US was subdued due to the Martin Luther King national holiday. Concerns about the troubled US financial sector receded reducing demand for safe haven currencies such as the US dollar and the Japanese Yen.

Analysts Cautious About Sustainability of Gains

Some analysts stated the Forex market was cautious about the sustainability of gains in share prices and remain cautious about the global economy. Yousuke Hosokawa, treasury department senior manager at Chuo Mitsui Trust and Banking Co. stated, “The currency market lacks direction and is moving within limited ranges. Gains in U.S. shares were within the range of rebounds and the U.S. financial sector still faces difficult times.” The return of risk appetite is providing short term Forex opportunities for many investors.

Bank of America and CitiGroup Report Losses

Both Bank of America and Citigroup both reported multibillion dollar quarterly losses on Friday. CitiGroup indicated they would split into two operating units. Despite massive Government intervention, many investors remain wary of the fate of Citigroup and the US financial sector in general.

Many Forex traders remained on the sidelines in anticipation of Obama’s inauguration on Tuesday. The incoming administration’

s monetary policies will affect available Forex opportunities and currency markets globally.

Dollar and Euro Rise

The dollar rose 0.4% from late New York trade on Friday to 91.03 Yen while the euro climbed 0.7% 121.50 Yen, and climbed by 0.3 % to $1.3348. The dollar index was down 0.7% at 83.587. Investors took advantage of Forex opportunities offered by higher-yielding currencies such as the Australian and New Zealand dollars which are seen as a measure of risk appetite. The Australian Dollar rose 0.8% to $0.6786 and against the yen was up 0.4% t at 61.78 Yen. The New Zealand dollar rose 0.6% to $0.5511 and 0.2% to 50.15 Yen.

New Administration, New Policies

A new administration takes the reins pf power in Washington Tuesday and will most likely make the economy a very high priority. Just how those unannounced policies will affect markets and Forex opportunities remains to be seen.

Job Losses Not As Bad As Expected

The US dollar rallied in Fridays trading following a jobs report with data that was not as bad as originally thought. Data in the report showed that job losses were not as bad as had been feared. It was originally thought that about 550,000 jobs had been lost and many investors breathed a sigh of relief when the report showed job losses of 524,000.

Return to Risk Aversion

At present it looks as though the dollar will continue to provide investors with a safe haven and Forex opportunity. Many analysts see a return to risk aversion which will help the dollar and Yen due to their reputations as safe havens in times of economic crisis. Despite 12 straight months of job losses and weak economic data the dollar continues to provide Forex opportunities for traders and investors.

Euro Zone Economy Deteriorating

The already beleaguered Euro fell further after data revealed a deteriorating Euro Zone economy. Data showed a bigger-than-expected drop in French industrial production which put more pressure on the Euro. The Euro received little support from an unexpected rise in euro zone retail sales and consumer demand in the Euro Zone remains weak.

Yen Makes Gains

Another currency that has been helped by the global financial crisis is the Japanese Yen. Like the dollar the Yen provides Forex opportunities and is seen as a safe haven currency. In Mondays trading the Yen reached a one-month high against the Euro. Heightened risk aversion boosted demand for the low-yielding yen, as well as the U.S. dollar, as investors rushed towards safer assets. Currency economist Lee Hardman stated, “The U.S. payrolls numbers were pretty dreadful and helped underline fears that the U.S. labor market is undergoing a severe deterioration, knocking market confidence and helping to fuel yen gains.”

All Eyes on European Central Bank

Many Forex traders will be watching the European Central Bank which is expected to aggressively cut rates later in the week. Hopefully the move will stimulate European markets and provide even more Forex opportunity for investors.

Dollar Falls

The US dollar fell on Wednesday and reached a 2 ½ month low against the Euro after the Federal Reserve slashed interest rates to between zero and 0.25%. The Euro reached a high of $1.4192 after the Federal Reserve said it would use “all available tools” to combat the ongoing recession and slashed rates to between zero and 0.25%. The Fed also added that it was considering possible purchases of longer-term U.S. Treasury debt.

Traders Sell Dollars

The announcement had traders taking advantage of this Forex opportunity to sell off dollars helping the Euro gain 11% this month. Adarsh Sinha, currency strategist at Barclays Capital in London. Stated, “

The Fed had an explicit commitment that they will leave interest rates very low for an extended period and that’s quite negative for the dollar because of relative interest rates. I guess the question now is: is this the beginning of a big move for the dollar, say euro/dollar to $1.60?”

Dollar Falls Against Yen

The dollar fell 0.3% against the Yen to 88.70. Yen gains against the Dollar helped to push the euro down 0.5 percent to 124.75 Yen. The yen has gained in recent months as investors unwound carry trades, reducing exposure to riskier and higher-yielding assets as the financial crisis mushroomed. The Yen has provided investors with Forex opportunities in the past because of its low rates.

Bank of Japan to Reduce Rates

There is speculation that the Bank of Japan would reduce rates to almost zero following a two day meeting which ends Friday. Bank of America G10 currency strategist David Powell stated, “With rates in Japan now higher than Fed rates, this puts further downward pressure on dollar/yen. It also increases the possibility that the BOJ will cut rates by 20 basis points on Friday.” Some Forex brokers are wary about the risk of Japan intervening to rein in the yen’s climb, which is hurting the nation’s exporters.

Currency markets can be volatile and the global economic crisis has both traders and investors watching closely for Forex opportunities that present themselves on a daily basis. This week has been a busy one with several countries releasing economic data that could affect Forex opportunities and both traders and investors will be watching closely.

Asian Auto Stocks Fall 10%

Asian auto stocks fell more than 10% after the US senate rejected a $14 billion dollar bailout plan for US automakers. The failure of the bailout measure increases the chances for a bankruptcy at one of Detroit’s ‘big 3’

automakers. It has been revealed the General Motors has retained bankruptcy counsel. Combined with other negative indicators the future of the dollar and the Forex opportunities it provides is uncertain.

Pressure on White House

Shares of Toyota and Honda fell by more than 10% as investors dumped shares on fears of massive unemployment and supply disruptions in the auto industry. The failure of the bailout measure has put pressure on the White House to consider giving the troubled auto industry emergency funding. Analysts and industry experts say that a bankruptcy at any of Detroit’s car makers could have a domino effect causing the failure of suppliers supplying the industry.

Bailout Failure Bad For Everyone in the Auto Industry

Hiroyuki Fukunaga, representative director of Investrust Inc in Tokyo stated, “

If this causes the parts makers under the umbrella of the Big Three to go under that could disrupt the supply of parts to Japanese automakers producing in the U.S. One way some people choose to look at this is that it could eliminate competition from the U.S., leading to a concentration of power in the auto industry to Europe and Japan. But the reality is that this would probably lead to severe conditions for the Japanese automakers as well.”

Analysts estimate that up to 90 percent of U.S. parts makers supply multiple customers, meaning a shutdown carries a risk of disrupting production all around. Ironically the failure of the automaker bailout has sent Forex traders scurrying to the safety and Forex opportunity that the dollar presently provides.

Forex Opportunities in a Down Market

Probably the most attractive feature of Forex markets is the ability to make profits even when stock markets are tanking. Forex opportunities present themselves even in a down economy. Many Forex traders will be watching this week’

s events closely. The White House will probably move on the bailout this week and the Fed is expected to announce further rate cuts but is also expected to announce that rates will not be cut further. Forex opportunities are out there and those who pay attention to coming events are sure to profit.