Greenback sliding against the EUR and the Yen

Forex News:

In reaction to the news that the FOMC would be keeping its benchmark interest rates exceptionally low for some time, the greenback slide against both the Euro and the Yen.

In addition, despite signs that the U.S housing market was beginning to recover, sales of New Homes fell to its lowest level on record- further fueling the dollar’s decline against its major currency counterparts.

Purchases of new homes within the U.S tumbled below expectations to an annual pace of 309,000, signaling that the added extension of the government tax credit may not be enough to revive demand.

This report further highlights Fed. Chairman Bernanke’s prior comments that even though the economic situation of the U.S is making a promising recovery, homebuilders continue to face intense competition from foreclosed properties that are continually driving down the prices in the market, while at the same time robbing the demand for new homes.

The result of which causes a chain reaction –decrease sales of new homes leads to a decrease in demand for construction, thus a decreased amount of employees in that field – directly effecting the level of employment for the country.

Following the release of Bernanke’s testimony to the House Financial Services Committee, and pessimistic U.S. Home Sales data – the U.S dollar plunged against its major counterparts. The EUR/USD broke a session high at 1.36250, and closed at 1.35371, up 0.18% from the day’s opening price at the Forex online market.

Today is the second half of Bernanke’s testimony of Congress; in addition, the U.S will release the Unemployment claims for last week, expected to drop to 461K, from the previous week’s 473K joblessness claims. Also out today (1330GMT), the monthly Core Durable Goods Order.

Orders have been revised to the upside in the past month, from 0.3% to 1%; while, Core orders have been revised to 1.4%. The positive trend is expected to continue, with a rise a rise of 1.6% in orders and 1.2% in core orders. This figure doesn’t touch the consumers, but has a long term impact on the economy.

From http://forextradingguru.blogspot.com

Recession Continues to steal jobs across the British Island

Forex News:

U.K jobless claims unexpectedly jumped this past January to the highest level since April 1997, as the recession continues to steal jobs from businesses across the British Island.

Yesterday morning’s Claimant Count Change reported that the number of people receiving unemployment benefits rose to a record 1.64 Million, increasing by a drastic 23,500 claims from the previous month.

Last month the number of joblessness claims had dropped by 14.6K – this month, economists were expecting unemployment claims to continue to fall by another 9.6K. Despite this increase, the unemployment rate stayed as expected at 7.8%.

In regards to salary, the average earnings index rose a dismal 0.8% last December over the year (1.2% excluding bonuses), versus expected 1.2% – the lowest recorded yearly change in salaries.

Despite the disappointing job figures, The GBP saw little change in the Forex online market trading, after the release of the worse than expected claimant count, trading at $1.5770 down 0.115% from the day’s opening of $1.57882.

Moreover, the Bank of England meeting minutes were released and showed that BoE policy makers agreed unanimously pause their £200 billion bond purchasing program.

Tuesday’s bullish trend for the GBP/USD took a turn for the worse, as the combination of the BoE vote to suspend its asset purchase program along, push the sterling down 0.744% against the greenback – the pair closed at $1.56647.

Early this morning, Britain’s bureau of National Statistics will release the Public Net Borrowing Figure – the difference in spending and income from public operations, central government and local governments.

British public expenditure is eyed by the opposition and by investors alike. After many months of extended borrowing, the British government is expected to report negative borrowing of 2.4B,something that could potential help the Pound regain some of yesterday’s losses.

From http://forextradingguru.blogspot.com

Trade balance curved in the market Unbalance

Forex News:

Early yesterday afternoon, the US and Canada simultaneously released their Trade Balance. The U.S December Trade Balance came out wider than expected – the deficit rose to -40.2B as imports surged more than exports.

Forex Analysts had predicted that the deficit would contract to 35.8B from its previous reported level of 36.4B, instead the US trade gap unexpectedly widened to its biggest level this year.

Even though exports climbed to their highest level since October ’08, this eighth consecutive rise in exports was trumped by an 8.4% increase in Imports (particularly petroleum).

The result of faster economic growth in emerging countries combined with a drop in the dollar’s value is allowing American goods are becoming more competitive and may in fact propel gains in sales overseas that will spur further gains in U.S. manufacturing.

On the other side of the 49th parallel, Canada also saw their Trade Deficit widen more than expected. As imports slightly outpaced exports, Canada’s trade deficit remained at 0.2B, versus the expected forecast that the trade deficit would shrink to 0.1B. The 1.7% increase in exports was slightly outpaced by a 1.8% rise in imports resulting in Canada’s trade deficit with the world widening to $246 million in December from $201 million in November.

According to the Bank of Canada, the combination of low U.S demand and strong Canadian dollar are a “significant drag” on the economy. Governor Mark Carney has pledged to keep his benchmark lending rate at a record 0.25 percent through June to stimulate demand unless the inflation outlook shifts.

Following the release of both countries trade balances, the Canadian currency tumbled against the USD- the pair increased from the day’s open of 1.06651 USD/CAD to 1.0686; however, by yesterday’s close, the Loonie managed to regain some of its lost ground against its US counterpart- closing at 1.06265.

Across the Atlantic, the Euro continues to move away from its 8 month low against the USD, as speculations increase that today’s EU summit will shed light on a possible rescue package for Greece. With the EU holding their 1 day summit today, the EUR increased from yesterday’s close of 1.37336USD to a high of 1.37995 in Asian markets early this morning.

While the Euro continues to rise versus its American counterpart, the British Pound continues to plummet against the USD. Yesterday, the Sterling was hit hard as the BoE Inflation report forecasted low inflation for a long period, suggesting more quantitative easing ahead; the Pound plunged 0.88% from its opening price of 1.57088 to 1.55701, finishing off the day at 1.55974.

Yesterday, the Bank of England lowered U.K.’s economic outlook and forecast inflation to undershoot its 2% target. The central bank Governor Mervyn King also kept the door open for further quantitative easing.

Britain’s February Inflation Report depicts economic growth to reach around 3.2% in the second quarter of next year- smaller than the previous estimate of 4%. According the BoE, the strength of the recovery is highly uncertain and output is unlikely to return to a level consistent with its pre-crisis trend for a considerable period.

King forecasted inflation to exceed 3% in January, but estimates the figure to fall below the target quickly. Annual inflation had exceeded the central bank’s 2% target in December for the first time since May 2009 and stood at a nine-month high of 2.9%. “It is more likely than not that inflation will be below the target for much of the forecast period, but the risks are broadly balanced by the end,” the bank said.

Shortly midnight, Australia released its employment change for January as well as its current unemployment rate. With both numbers coming out better than expected – employment change increased to 52.7K versus expected 15.1K causing the unemployment rate to tumble to 5.3% versus expected 5.6% and prior 5.5% – the Aussie rose more than 1% against the dollar and the Yen.

The AUD/USD opened in Asian Markets this morning at 0.87506- after the release of the better than expected employment data, the pair increased 1.75% to a week high of 0.89040

From http://forextradingguru.blogspot.com

Both Britain and Europe to announce rate decision, one day ahead of U.S Non-Farm Payrolls

Forex News:

It is a very busy day ahead, as both the European Central Bank and the Bank of England are scheduled to announce their rate decisions.

Early this afternoon (1245GMT), the European Central Bank will announce its Minimum Bid Rate. The ECB, is expected to keep benchmark interest rates at its current record low level of 1.0%. This prediction come after Jean-Claude Trichet, president of the ECB, indicated that he would like wait for new growth and inflation forecasts in March before deciding when to step up the withdrawal of measures used to battle the financial crisis. Continual concerns over rising unemployment, in addition to increasing apprehensions that Greece’s fiscal problems could spread through the Euro zone, complicate the ECB’s efforts to return the euro-area economy to health.

The ECB announcement comes shortly after the Bank of England’s official rate decision (1200GMT). Analysts do not predict a rate hike- the BoE, is expected to leave the overnight rate at its historical low level of 0.5%. This decision comes out following earlier announcements, and indicators that that the UK emerged, barely, from the recession in the 4th quarter of last year.

The pressure is high for the Euro and the Pound, as these two highly anticipated rate decisions, come one day ahead of the U.S Non-Farm Payroll Change (announce tomorrow at 1330GMT), and follow yesterday’s release of a better than expected ADP Non-Foreign Payroll figure.

The release of ADP Non-Foreign Payroll, widely considered as an indicator for the NFP, fueled the dollar towards appreciating against both the Pound and the Euro. Following the release of the ADP figure yesterday, the EUR/USD, fell below the 1.4 mark, hitting 1.3960. This bearish reversal, further confirms that the Euro is on the cusp of entering a downwards trend against the dollar- any unexpected news in the ECB official bank rate today, could send the Euro spiraling downwards against its USD counterpart.
Moreover, the positive news in regards to U.S employment further caused the Pound to depreciate against the dollar. Yesterday, the GBP/USD tumbled from a 1.6070 session high to close at 1.59003.

For the first time in a long time, analysts are predicting an increase in the US Non-Farm payrolls of 10K. Last month’s Non-Farm Payrolls were disappointing and showed a loss of 85,000 jobs in the US in December. Hopes were already high for the Non-Farm Payrolls, but expectations increased exponentially when yesterday’s ADP Non- Farm Employment Change, was much better than expected. The ADP figure, which measures the jobs in the private sector, showed a loss of 22,000 jobs. While it is still a negative number, it is much lower than the expected loss of 31K, and lasts months loss of 61K.

Apart from increasing against both the GBP and the EUR, the positive results of the ADP figure, triggered the USD/JPY to rebound from 90.05 session low has extended to session high at 90.85 high.

The release of a better than expected positive result in the Non-Farm Payrolls on Friday will certainly further boost the dollar against its major currency counterparts, and raise chances of a future rate hike. While there have been many signs that the U.S is on the road to recovery (namely the higher than expected Q4 GDP, announced last week), a strong number in the NFP, will surely push the USD on the path to regaining some of last year’s traumatic losses.

From http://forextradingguru.blogspot.com

Euro continues to face a tough battle

Forex News:

The U.S dollar slipped further away from its six month high against the Euro, as concerns in the Forex market began to ease over Greece’s debt. The EUR managed to keep a firm hand, on overnight gains, reaching $1.36969 (increasing 0.18% versus the USD) in the Asian Markets early this morning. However, the Euro continues to face a tough battle, as investors continue to remain skeptical over Greece’s, and now Portugal’s, financial problems.

Whether the Euro manages to hold on to this morning’s gain against the US dollar is yet to be seen- as both the EU and US are set to release two pivotal reports later this week (EUR minimum bid rate, USD Non-Farm Payroll Change).

Tomorrow (1245GMT), the European Central Bank will announce its minimum bid rate- Jean Claude-Trichet, the president of the ECB, is predicted to leave the overnight Interest rates unchanged at 1.0%. Unemployment in the European Union has skyrocketed to 10%, while the recovery from the recession is still wavering- the decision to keep the rate low will hopefully give the EU a stronger push towards economic recovery.

Later today (1315GMT), the US will release its ADP Non-Farm Payrolls, a predictor index for Friday’s widely anticipated Change Non-Farm Payroll. The index is predicting a further decrease in the number of employed people by 31K; a substantially smaller decrease than last month’s fall of 84K. Also today, the US will release it ISM Non-manufacturing PMI expected to come in at 51.1, versus a prior level of 49.8 in December. A reading of above 50 signifies growth, indicating that service industries in the U.S are expected have expanded in January.

This morning the Asian market saw an increase in the GBP, as the sterling rose following news that the UK consumer confidence improved in January coming in better than expected and increasing 3 points from the previous month. The Pound advanced against 15 of its 16 major counterparts following news that that consumer sentiments were improving. Following the release of the index, the British currency rose to $1.6027 (6:40 GMT) from $1.5973 in at closing in New York yesterday.

Britain managed to return to economic growth in the Q4 of 2009, as both housing prices and unemployment began to decline. However, this small increase in the Pound could easily be lost. Tomorrow, the Bank of England will announce the Official Bank Rate- the Monetary Policy Committee is expected to leave its key interest rate unchanged at the record low level of 0.5%. Moreover, the BoE is expected to call an end to its radical policy of pumping out new money after Britain narrowly emerged from the recession in the last quarter of 2009. Introduced almost one year ago by the Bank of England, this extreme policy’s objective was to encourage commercial banks to increase lending to both businesses as well as individuals.

Australia’s trade deficit continued to widen last December, as imports of goods such as gasoline and oil reached 2 year high – further adding evidence to the economic recovery. Imports rose 6% last December, the biggest monthly gain since May of 2008 (oil and gasoline imports jumped 26%, while gold imports swelled a record 51%). Following yesterday’s decrease of 1.4% against the USD (due to the unchanged overnight rate), news of the increased trade deficit, caused the Aussie to continue to fall against the greenback- dropping from 88.7 U.S cents to 88.64 U.S cents after the announcement.

The fate of the AUD is still up in the air, as tomorrow (0030GMT) the Australian Bureau of Statistics will release its monthly Building Approval, expected to fall 0.2% versus prior increase of 5.9%, and its Retail Sales, expected to increase slightly by 0.3% versus prior reported increase of 1.4%. The RBA’s decision yesterday to keep the interest rate unchanged at 3.75% sent the Aussie on downwards spiral. If these two reports come in better than expected the Aussie could potential regain some of yesterday’s and today’s losses.

From http://forextradingguru.blogspot.com

The USD makes a surprising recovery

Forex News:

The USD finished off last week on a very positive note as the dollar rose against all major currency, following the release of Friday’s stronger than expected economic indicating that the United States was recovery faster than other developed countries.

When markets closed on Friday, the Dollar reached a 7 month high versus the Euro as the EUR/USD drastically fell allowing the dollar to cross the 1.4 EUR/USD mark- closing at 1.3860. The dollars increasing momentum was also shown as it hit a hit a three week high against the British pound, closing at 1.5983 on Friday. The USD also gained against the CHF and the CAD.

The gains in the US dollar can be attributed to the release of Friday’s advanced GDP. The report showed a rapid increase of 5.7% for Q4 of 2009 – the fastest increase in 6 years. Such positive data raises expectations that the U.S FED would potentially increase interest rate before the European Central Bank, thus encouraging investors to move into dollar based assets.

However, despite this unexpected accelerated growth in the Q4, many economists are concerned that this economic rebound may not be sustainable as fiscal and monetary stimulus is withdrawn and recent data shows the recovery in housing and retail demand slowing.

A closer evaluation of the Q4 GDP, reveals that much of the increase in the GDP was due to increased auto production and rebuilding of inventories; at the same time, consumer spending and investments remain weak.

Much of the improvement in Q4 GDP was due to increased auto production and rebuilding of inventories. Consumer spending and business investments remain weak. USD traded higher after release of stronger than expected GDP. The GDP report may have some analysts looking for an earlier FOMC rate hike. The GDP deflator however came out below expectations which suggest that inflationary pressures remain tame despite improving growth.

While the USD may have ended January on a promising note, it is questionable if it can continue its uphill battle and regain some of the previous year’s losses against it major counterparts. The first week of February already promises us some interesting economic action, starting today with the release of Personal Spending expected to increase 0.3% compared with the 0.5% of last month, and the January ISM Manufacturing PMI expected at 55.5 compared to last month’s 54.9. Tomorrow, the US will release its Pending Home sales – expected to remain at the same rate as the previous month. US Dollar traders will have to pay strict attention to any surprises in the Non Farm payroll results, released later this week on Friday.

This week, the US will also be releasing its unemployment claims, followed by the unemployment rate predicted to stay constant at its dismal level of 10%. Its predicted that the US labor market added a net 13,000 jobs throughout the month of January-however, these numbers are notorious for being volatile and very difficult to predict.

Its sufficed to say that USD is in for a risky week- whether or not the dollar manages to hold on tight to its previous week’s gain, all depends on whether this week’s fairly positive predictions transpire.

From http://forextradingguru.blogspot.com