Economic Optimism Triggers Risk Appetite

Growing economic optimism in both stock and currency markets may affect the US dollar exchange rate in the coming weeks. Many believe the worst of the recession is over dampening the allure of the US dollar as a safe haven currency. This week investors will be able to review an advance report of first quarter GDP which is expected to show economic contraction slowing in the US. This news is expected to adversely affect the US dollar exchange rate.

Q1 GDP Report Due

Joe Manimbo of Ruesch International stated, “I think what’s really going to probably grab the most attention will be the first look at Q1 GDP. We could see the dollar perhaps react negatively if we see a more encouraging result, which of course would boost risk appetite and reduce demand for safe-haven currencies.” Another event expected to affect the US dollar exchange rate is the upcoming meeting of the Federal Reserve. Forex traders will be paying close attention to statements from the Fed searching for clues about the Fed’s assessment of the economy. Traditionally data from the Fed has an effect on the US dollar exchange rate in currency markets.

Safe Haven Demand Falling

Safe haven demand has been falling affecting the US dollar exchange rate. Larger than expected corporate earnings and economic news has lifted investor sentiment and many see signs of economic recovery in the US. In an article in the Financial Times US Treasury Secretary stated, “There have been some encouraging signs that the global economic downturn may be slackening.”

Current US Dollar Exchange Rates

On Friday the US dollar exchange rate against the Euro was at $1.3267, the highest in a week. The US dollar exchange rate against the Japanese Yen was at 96.99, a decline of 1.1%. One factor expected to affect the US dollar exchange rate include US banks ‘stress tests’ which investors will be watching closely.

Several Economic Reports Expected This Week

Other economic reports that will affect the US dollar exchange rate include The Consumer Confidence report on Tuesday, Personal income and consumption for March on Thursday, and consumer sentiment for April on Friday. It looks like a busy week ahead for FX traders.

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Euro to Dollar Rate Little Changed

The Euro to Dollar exchange rate was little changed in Tuesday’s trading. A decline in European shares caused the euro to dollar rate to erase earlier gains made by the euro due to larger than expected gains in German investor sentiment. Investors remained concerned about the health of US banks.

Financial Institutions Struggling

Banking giant Mellon reported a decline in profits of over 50% and State Street Corp reported an 8-12% decline in operating revenue. The earnings reports caused a decline in stock markets and reinforced the view that financial institutions are struggling and recovery will take more time. Economists say that mixed reports from financial institutions are keeping risk aversion high and are affecting the euro to dollar rate.

Investors Dump Euro in Favor of Dollar and Yen

These mixed reports have caused many forex investors to dump the euro in favor of safe haven currencies which include the US dollar and the Japanese Yen. The Euro to dollar exchange rate remained unchanged at $1.2920, down from a high of $1.2988. The euro to dollar rate had risen in advance of the ZEW report which measures German investor confidence.

Euro to Dollar Rate to Remain Under Pressure

The euro to dollar rate is expected to remain under pressure due to uncertainty whether the European Central Bank will adopt unconventional policies to address the ongoing global recession. The ECB is seen by many economists as behind the curve in adopting policies to address the recession and credit crunch and this has had an adverse effect on the euro to dollar rate in currency markets.

Investors Focus on Health of Banks

Investors are expected to continue the focus on banks and the health of the financial industry. There is a great deal of uncertainty over how well lenders will perform if the global recession proves to be longer and deeper than expected. Risk aversion is expected to continue to put pressure on euro to dollar rates on Forex exchanges.

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Financial Sector Concerns Affect Risk Sentiment

The recent rise in risk appetite has been dampened by concerns about the banking sector and credit markets. Last week investors snapped up forex opportunities offered by high yielding currencies like the Australian and New Zealand dollars. The Japanese Yen and the US dollar rose on Tuesday as forex brokers took defensive positions as recent optimism faded.

Yen Gains on Safe Haven Buying

The Yen had hit a six month low against the Euro and the dollar but gained as renewed concerns about the health of the banking system emerged. News about the failure of IBM’s takeover bid for Sun Microsystems also sent investors to the safe haven and forex opportunities offered by the Yen and Dollar.

Euro Zone GDP Declines

Figures from the Euro Zone showed a 1.6% fall in GDP during the fourth quarter. A 0.9% decline in European stocks and a 1% fall in the Standard and Poor’s 500 stock futures also put pressure on the Euro and other higher risk currencies. The decline in equities prompted forex brokers to seek dollar denominated assets which are seen as safe havens in down markets. The Yen which is also seen as a safe bet rose providing investors with forex investment opportunity.

IMF Warns of $4 Trillion Toxic Debt

A report by the Times that stated that the IMF will warn that toxic debt by banks and insurers could total over $4 trillion dollars had investors seeking the safe havens and forex opportunities of the dollar and Yen. The Yen did not react to the news that the Bank of Japan will leave rates unchanged at 0.1%.

Long Easter Weekend Ahead

Many forex brokers expect currency markets to be driven by stock markets in advance of the long Easter weekend. Should stocks rise towards the end of the week it could signal a change in risk sentiment and provide forex opportunities for investors.

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Yen Falls as Stocks Gain

On Monday the Japanese Yen hit a six month low against the US dollar and the Euro. Many forex brokers saw the decline as the result of increased risk sentiment and gains in US and Asian stock markets. The Yen is seen as a safe haven currency and as risk appetite grows investors sell the Yen and seek forex opportunities in higher yielding currencies.

Global Plan For Developing Economies

Forex brokers cited emerging market asset recovery and a global plan to help developing economies as factors contributing to increased risk sentiment. Investors took advantage of the forex investment opportunities offered by higher yielding and riskier currencies such as the Aussie and Kiwi dollars. Mitsuru Saito of Tokai Tokyo Securities stated, “The yen seems to be becoming the easiest to secure in the market now, compared with the dollar and euro. A move may be emerging in which speculators use the yen to fund investments in other currencies and assets.”

ECB Reluctant to Cut Rates

Forex brokers and traders cited the perception that central banks may be at the bottom of their rate cutting cycle as one of the chief reasons for the Yen’s decline. Many forex brokers saw strong hesitation on the part of the European Central Bank to cut rates. The ECB did not cut rates as much as expected and is seen as behind the curve in taking unconventional measures to address the ongoing global recession.

Signs of Recovery

The Reserve Bank of Australia meets on Tuesday and many forex brokers expect no significant action by the central bank. The rise in risk appetite has affected the forex opportunity offered by the Australian dollar. The US dollar also faced pressure as investors sell the dollar in favor of the forex opportunities offered by other currencies. Many forex brokers and investors see signs of a global recovery while others believe the optimism to be premature.

As usual increased risk sentiment means increased forex opportunities on global currency markets. Some economists believe the global economy has hit bottom and recovery is underway. Hopefully their assessment is correct.

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Forex Offers Opportunity Despite Market Conditions

The forex currency exchange market is the world’s largest and almost $3 trillion dollars are traded daily. Investors can easily take advantage of the many forex opportunities provided by this huge global market. During the current global recession risk aversion has been dominant in global forex trading although there have been several short lived gains in risk sentiment. No matter how badly stock and commodity markets are performing global forex trading allows investors the opportunity to make money.

Investors Waiting For G 20 Summit

Currently forex brokers are somewhat skittish in advance of the G 20 summit and the European Central Bank meeting taking place this week. The US dollar rose against the Euro as news from the G 20 summit and the ECB meeting overshadowed a report that said the US experienced the loss of 742,000 private sector jobs in March.

Aussie and Kiwi Dollars Fall

Last week investors took advantage of the forex investment opportunities that the high yielding Aussie and Kiwi dollars provided. Reduced risk sentiment sent both the Aussie and Kiwi dollars lower in global forex trading. The Aussie dollar was adversely affected by a report that showed that Australian retail sales declined by the most in nine years. The Kiwi dollar fell after the New Zealand Central Bank warned of a rise in market interest rates. The decline of these two currencies limited forex opportunities previously offered by the Aussie and Kiwi dollars. The Australian dollar fell 0.5% to $0.6878 VS. The US dollar while the Kiwi dollar fell 0.8% to $0.5548 against the US dollar.

Euro Most Vulnerable Currency

Any forex opportunities offered by the Euro are limited as the Euro is seen by many as most vulnerable to event risk of the G 20 and ECB meetings. Forex opportunities are likely to be limited until the completion of both meetings. Both meetings are likely to have an impact on forex opportunities but at the present time how much impact is uncertain.

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Yen Pressured By BOJ Moves

Both the Dollar and the Euro rose against the Yen as rising risk sentiment among investors provided forex opportunities in currency exchanges.  An unexpected rise in US housing starts and news that the Bank of Japan may buy subordinated loans put pressure on the Yen. Many engaged in forex trading voiced fears that the move by the central bank could flood markets with Yen. Mark Frey of Custom House in Victoria B.C. stated, “The BOJ move overnight weighed on the yen and we’ve seen some relatively robust moves in equities.”

Federal Reserve Meets

Good news is expected from the US Federal Reserve bank meeting especially if the Fed announced plans to purchase long-dated Treasuries which would keep long term rates low. The Euro traded at $1.30 for the second day in a row providing Forex opportunities for investors. The upturn in risk sentiment had forex brokers dumping the dollar in favor of other higher yielding currencies.

US Housing Starts Boost Risk entiment

Although many forex brokers doubt the sustainability of the Euro’s recent rally others are taking advantage of the forex investment opportunities provided by the Euro’s rally. A surprise 22% increase in US housing starts in February helped to boost risk appetite and rising share prices also contributed to increased risk sentiment.

Yen’s Safe Haven Status Questioned

The safe haven status of the Japanese Yen is being questioned by many forex brokers. Traditionally the Yen has provided safe haven and forex opportunity in down markets but many forex brokers fear that recent actions by the Bank of Japan could flood currency markets with Yen.

Rally Providing Forex Opportunity

The recent rally in equities markets has provided forex investment opportunities as currency markets react to the recent rally in stocks. Forex online trading has been brisk and forex brokers report an increase in forex activity. Many believe financial systems are beginning to stabilize and markets are reacting. Hopefully this trend will continue.

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The G 20 summit scheduled for April will undoubtedly affect global markets and forex opportunity for investors. European Commission chief Jose Manuel Barroso said that Europe will speak as one entity at the upcoming conference despite disagreements between some countries. European leaders will meet in Brussels this week to try to reach a consensus before the April meeting. Barroso stated, “Europe must speak with one voice in London and I think we will do that. It is critically important not only for Europe, but for the world, that we have this success here in London.”

G20 finance ministers met in London on Saturday and said they would use their economic firepower to address the global recession and help emerging economies. Equity markets were up for the fifth day in a row and currency markets provided several forex investment opportunities. The troubled Euro rose against the dollar as did the British pound. Investors were quick to snap up the forex opportunities provided by these currencies.

Although differences remain between Europe and the US regarding policies to address the global recession markets remain upbeat. France and Germany are rejecting US requests for more spending on stimulus programs and believe that tighter regulations are the key to solving the crisis. Great Britain favors US style stimulus plans. Forex brokers will be watching the conference carefully.

The US Federal Reserve bank meets on Tuesday and Wednesday and forex brokers are waiting to see whether the Fed will buy longer dated treasuries to help keep interest rates down. The Bank of Japan also meets this week and may also consider the purchase of long-dated government bonds in a similar attempt to keep interest rates down.

In the past few days there has been a rise in risk sentiment and the forex opportunity that risk appetite brings. Some US economists believe that stimulus programs are beginning to have an effect on the US economy. Recovery is sure to bring increased forex opportunities for investors globally.

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.

US Job Losses Less Than Predicted

The US dollar fell against the Euro on Friday as data showed US job losses were not as bad as predicted. Investors took advantage of the Forex investment opportunities as many investors dumped safe haven trades in favor of higher yielding currencies.

Investors Seek Higher Yielding Currencies

Risk appetite returned to currency markets and investors sought out the forex opportunities provided by higher yielding currencies such as the Aussie and New Zealand dollars. Some emerging currencies provided investors with Forex opportunities such as the Thai Baht, the Brazilian Real and the Mexican Peso. Since the US job forecast was pretty much in line with market expectations a slight return to risk appetite sent investors searching for Forex opportunities.

US Dollar to Recover

Many currency experts believe that the US dollar will recover and climb higher. Richard Franulovich of Westpac Banking Corp stated, “I still believe that the dollar has not yet seen its highs. I still have a healthy respect for this uptrend.” Data released on Friday showed job losses of 651,000 in February and unemployment at 8.1%, the highest in 25 years.

Dollar Remains Reserve Currency

The US dollar remains the world’s reserve currency providing forex opportunities and safe haven for investors. The dollar remained almost unchanged against the Japanese Yen which is also considered a safe haven currency. The Yen has struggled lately as dismal economic data from Japan and possible political instability put pressure on the Yen.

Dollar Falls Against Swiss Franc

The dollar fell against the Swiss Franc and the Aussie dollar rose 0.5% to $0.6405 while the New Zealand dollar rose 0.7% against the dollar to $0.5026 providing Forex opportunities to many investors. Todd Elmer of CitiFX in New York stated, “The dollar tested recent highs over the past few sessions, so the moves we’re seeing now are not surprising.”

Worst Slump Since WW2

Many analysts believe that the global economic slump is even gloomier in other parts of the world especially in the Euro Zone which is burdened with a deepening recession in Eastern Europe. A top IMF official said that the industrialized world is in the worst economic slump since World War Two. Brian Kim of UBS stated, “Dollar assets remain an attractive option to risk averse investors, especially as other central bank rates converge to zero and more unconventional policies are implemented.”

Despite the state of the global economy many forex investment opportunities are still available to investors. Markets remain volatile but savvy investors are sure to be there when forex opportunities present themselves.

Quick Forex Tip: Most forex brokers offer those interested in e currency trading training courses and demo accounts. Demo accounts allow new traders to trade in real time without risking actual funds. Many experts recommend that new traders use a demo account until they feel comfortable and confident trading. These trading platforms are available from most brokers. Additionally, there are several trading platforms available for free on the internet, offering access to a wide selection of currency pairs.

Euro Falls Against Dollar and Yen

The already troubled Euro fell further against the US dollar and the Japanese Yen as investors predicted the European Central Bank would cut rates in an attempt to salvage the dismal European economy. For months the Euro has provided little or no Forex opportunity to investors. Concerns about the state of Eastern European economies also put pressure on the Euro.

ECB to Cut Rates

The ECB is expected to cut rates to 1.5% and in all probability will revise its forecasts to show a deep recession in the Euro Zone. Tsutomu Soma of Okasan Securities said, “In addition to a rate cut, investors will watch whether the ECB comes up with measures to help solve the problems the euro zone is facing as its neighboring countries, as well as some of its members, are stumbling.”

BOE to Cut Rates and Increase Money Supply

The British Pound fell again against the US dollar as the Bank of England is expected to lower rates further on Thursday and in all probability will start to increase the money supply in an attempt to bring the UK out of the ongoing global recession. The pound has provided limited forex investment opportunities for forex brokers and investors.

Concern Over Declining Japanese Economy and Political Instability

The Dollar rose further against the Japanese Yen and forex brokers remain concerned about the rapidly declining Japanese economy and political instability in Japan. The situation in Japan is rapidly deteriorating causing a lack of confidence in the government. Bank of Japan board member Miyako Suda said that it is uncertain whether the Japanese economy has hit bottom. There was one bright spot in all the data; China latest stimulus actions and data suggest that China is beginning to recover which brought a slight lift in risk appetite and forex opportunities.

US Non Farm Payrolls Due

Also due this week is the US Non Farm Payroll report. The news is not expected to be good and could send forex brokers and traders to the safe haven and forex opportunities of the US dollar. At present it would seem that the US dollar is the only safe haven currency left.

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.

Dollar Benefits From Safe Haven Status

Despite the dismal economic news from the US the dollar is expected to gain this week and continue to provide safe haven and forex opportunity for investors. The Non Farm Payroll report is due this week and is expected to show a 7.9% unemployment rate, the worst since 1949. European central bank meetings could also spur safe haven buying as banks cut rates in an attempt to thaw the ongoing credit freeze.

US Economy Continues to Contract

Even though the US economy continues to contract the perception is that the recession will continue worldwide but the US will be the first nation to recover. The return to safe haven buying has limited forex investment opportunities for many. Japan continues to suffer its worst contraction in 25 years and Eastern Europe remains in a deep and prolonged recession. Some economists believe that the recession which started in the US will be worse than anticipated. Jacob Oubina of Forex.com, stated, “The investment community has finally woken up to the fact that…when the U.S. sneezes, the rest of the world catches a cold.”

US Retail Sales Off

In the US retail sales have fallen off which has adversely affected countries dependent on exports. Economic uncertainties have sent many investors scurrying to the forex opportunity and safe haven offered by the US dollar and the Japanese Yen. Many investors are also buying gold and the price now hovers around $1,000 an ounce.

Bernanke and Geithner to Speak

Forex brokers are eagerly awaiting Fed Chairman Bernanke’s testimony on Tuesday and Treasury Secretary Geithner is expected to make several appearances during the week which may affect markets. Any good news could signal a return to risk appetite and the forex opportunities that usually accompany it. The US is expected to release economic indicators that include pending home sales, personal income, and consumer spending.

ECB and BOE Decisions Due

Other data due out this week include rate decisions by the European Central Bank, and the Bank of England. These decisions will have far reaching effects on currency markets and will affect available forex opportunities. In Europe possible credit downgrades are expected to put further downward pressure on the already troubled currency.

This week will be a volatile one on currency markets. Forex brokers will have reams of data to absorb and forex investment opportunities are bound to be affected. Good news seems hard to come by lately!

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.