Better Than Expected Q 3 GDP Figures

The US dollar surrendered gains made earlier in the week as third quarter GDP figures showed that US GDP rose 3.5% better than earlier predictions of 3.3%. The unexpected gain spurred a rise in stocks and commodities and sent currency traders and investors in search of higher yielding currencies. Once again the Aussie and Kiwi dollars were the big winners gaining a full 2% against the greenback. The Aussie which has a benchmark rate of 3.25% traded at US$0.9146 after trading as high as US$0.9162 earlier in the trading session. The Kiwi dollar rose as high as US$0.7352 and last traded at US$0.7342.

Canadian Dollar Lifted by Rise in Stocks and Commodities

The Canadian dollar rose as stocks and commodities surged due to US third quarter GDP results. Benjamin Reitzes of BMO Capital Markets stated, “U.S. growth is good news for growth in the global economy and good news for commodities, so ultimately good news for the Canadian dollar.” US unemployment claims declined to their lowest in seven months but are still seen as to high to indicate a recovery. Boris Schlossberg of GFT said, “The (jobless claims) figure remains … above the 500,000 barrier and until it drops below that level the market will not be fully confident that the recovery has taken hold.”

Bank of Canada Officials Warn About ‘Loonie’s’ Appreciation

Despite skepticism in some quarters risk appetite rose across the board and put downward pressure on the greenback. Camilla Sutton of Scotia Capital Inc. stated, “Today we’ve had a reversal in sentiment across all markets as stronger GDP put risk into the market once again.” At their October 20th meeting Bank of Canada officials warned that the appreciation of the ‘loonie’ threatens Canadian economic recovery. The currency, which hit a four year low from March 9th through October 19th, has gained 27%.

The dollar advanced 0.9% against the Japanese yen trading at 91.41 after hitting session highs of 91.62.

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Bad News For the Dollar

The US dollar has declined the most in a month against the euro and hit a 14 month low last week as investors and currency traders bet that the Federal Reserve will be behind the curve in raising interest rates. Dale Thomas of Insight Investment Management stated, “There’s no good news for the dollar. The underlying trend is still for a gradual recovery of the global economy and a weak dollar.” Thomas also said the US dollar will remain a “funding currency” for investors to purchase higher yielding assets.

Japan’s Finance Minister Speaks

The dollar vs. euro fell 1.2% to $1.4905 and the greenback hit $1.4968, the lowest since August 2008. The Japanese yen fell 1.2% against the dollar trading at 90.89> the yen fell against all 16 of the most traded currencies as investors and traders speculated that Japanese investors will send currency out of the country for higher returns and that the Japanese government will not support a strong currency. Japanese Finance Minister Hirohisa Fujii stated, “The shift in Japanese currency policy has broken the relationship between the yen and risk, but the boost to sentiment already looks to be fading.” He also told reporters that governments are responsible for the stability of their currencies and currencies “need to reflect the strength” of economies.

Aussie Dollar On Track For Parity With Greenback

The Australian dollar rose 1.2% last week and hit 92.70 U.S. cents and some currency experts and banks including Barclays Capital, BNP Paribas SA, Morgan Stanley and St. George Bank Ltd. Believe the Aussie dollar could reach parity with the US dollar. Australia’s Reserve Bank Governor Glenn Stevens became the first G20 banker to raise rates when he raised the overnight cash target to 3.25% a quarter percentage point increase.

BOE to Suspend Asset Purchases

The pound rose 3.2% after the Bank of England is likely to suspend asset purchase programs. The pound traded at $1.6356, the largest advance since May. According to Deutsche Bank AG, the world’s largest currency trader, the pound is ‘undervalued.’ The upcoming meeting of euro zone finance ministers in Luxembourg on Oct. 19 will address the euro’s rise against the US dollar and will likely affect currency exchange rates.

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Bernanke’s Remarks Help Dollar

The US dollar recouped some of this weeks losses after Federal Reserve Chairman Ben Bernanke said he was contemplating an exit strategy from quantitative easing and low interest rates. After a heavy pummeling this week the greenback pulled back from a 14 month low against other major currencies. Many investors and traders have seen quantitative easing and low interest rates as the main causes for the dollar’s weakness.

Fed May Change Policies

In a statement late Thursday Bernanke said that the Fed has the ability to change both policies but said that present policies are likely to be continued in the near future. Recently the US dollar has fallen on very weak economic data and dismal employment figures and Bernanke’s comments were seen as dollar positive. Ulrich Leuchtmann of Commerzbank stated, “Explanations by Fed officials have been helpful in clearing the air on what strategy will be taken as the economy recovers. The market is not yet ready to jump on the rate rise outlook to aggressively buy the dollar.”

Asian Dollar Demand

The dollar vs. yen rate rose 0.8% to 89.13 yen pulling back from an eight and one half low against the yen. Traders reported that dollar demand from Japanese investors helped to bolster the greenback in European markets. The euro fell to $1.4725 falling from a two week high of $1.4815 on Thursday. On Thursday ECB President Jean-Claude Trichet said that US support for a strong dollar was important. The DXY which tracks the dollar against six major currencies rose 0.4% to 76.250, pulling back from a 14 month low of 75.767.

Dollar’s Reserve Status Secure

Many currency analysts believe that some of the US dollar’s troubles come from speculation that the dollar may lose its status as a global reserve currency. Although some countries have suggested replacing the dollar as a reserve currency the dollar’s status as the world’s top reserve currency status seems secure for now.

Quick Forex Tip: The International Currency Trading market has no central exchange like stock and commodities markets. Currency markets are dispersed throughout the world and the primary trading centers are, in order of importance, London, New York and Tokyo. The geographic dispersal means that markets are always open somewhere in the world and traders can jump on the internet and hopefully make very profitable trades at any time of the day.

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.

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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.

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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 fears 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.

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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.

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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.

Quick Forex Tip: The International Currency Trading market has no central exchange like stock and commodities markets. Currency markets are dispersed throughout the world and the primary trading centers are, in order of importance, London, New York and Tokyo. The geographic dispersal means that markets are always open somewhere in the world and traders can jump on the internet and hopefully make very profitable trades at any time of the day.

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.

Quick Forex Tip: Selecting a reputable forex broker has been made easy thanks to broker reviews and forex forums on the internet. There are lists of individual forex broker available on the net making it easy for new traders to compare forex brokers. Broker review sites contain the real life experiences of traders who have worked with individual forex brokers and can be a very valuable source of information.

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.

Quick Forex Tip: Education is very important for anyone interested in forex online currency trading. Many factors influence currency exchange rates including economic reports, political conditions, and market psychology. Fortunately there are many excellent training programs available for free on the internet to help novice traders gain a thorough understanding of forex markets and the fantastic opportunities they provide investors.