Forex Trading

The European currency may gain further after Germany rebuffed a U.S. plan to increase fiscal stimulus to help pull the global economy out of recession. The fact the Euro-Zone nations avoided making any fresh commitments to extend spending, should encourage more investments in Europe and, as a result, to boost the EUR currency.



USD - USD Hits 5 Weeks Low against the EUR

The Dollar pared losses against the EUR on Monday after the New York Federal Reserve Bank's manufacturing index fell to a record low in March, adding to worries about the U.S. economy. The USD experienced some gains, rising to $1.3000 from around $1.3055 yesterday, however it still remained down 0.9% during the trading session.

Moreover, economic data published yesterday imply that the U.S. recession is likely to deepen further. To give an example of the type of negative data emanating from the American economy, the Empire State Manufacturing Index had its worst showing since 2001! This is also a signal that economic difficulties are starting to spread from the financial sector into the mainstream economy. Investors will have to adapt themselves to the upcoming economic hardships as these changes will not rectify themselves within a short period of time.

Later today, there are several important economic data releases coming out of the U.S. The most important of these publications is the Building Permits indicator at 12:30 GMT. The release is expected to be lower than the previous figure, meaning the USD could continue a level of bearishness today. Traders should stay close to the market as there is a strong chance to capitalize on the fluctuations which will likely follow this release.

EUR - EUR Gains against Major Currencies

The EUR experienced a bullish trading session yesterday, as it appreciated against most of its major currency pairs. The 16 nation's currency hit a five-week high against the USD yesterday as gains in European stocks signaled investors' willingness to take on more risk.

A rise in Euro-Zone inflation last month helped push the EUR above $1.30 for the first time since Feb. 10 in early trading. A pledge by the G20 finance ministers during a weekend summit to double the resources available to aid emerging market economies also lifted spirits.

In addition, European Central Bank (ECB) President Trichet said last week that deflationary risks were negligible, even as he left the door open to another Interest Rate cut. The central bank, which expects inflation to average just 0.4% this year, has already reduced its key Rate by more than half since early October to a record low of 1.5%.

Looking ahead to today, the most important financial indicator scheduled to be released from Europe is the German ZEW Economic Sentiment. Analysts are forecasting this figure to slightly decrease from its previous reading. Traders will be paying close attention to today's announcement as a stronger than expected result may continue to boost the EUR in the short-term.

JPY - Yen Slides on Weakening Economy

The Japanese Yen completed yesterday's trading session with mixed results versus the major currencies. The JPY fell against the EUR yesterday, pushing the oft traded currency pair to 1.2171. The JPY experienced similar behavior against the GBP as the pair rose from 137.50 to 138.50 by days end.

The Yen's safe-haven appeal has, however, lost some of its luster due to a rapid deterioration in Japan's economy, with the trade balance falling into deficit, and political uncertainty with an unpopular government facing an election that must be held by October. The Bank of Japan is seen likely to keep Interest Rates unchanged at 0.10% at a two-day policy meeting that ends on Wednesday. The BOJ is also expected to discuss whether to raise its purchases of government debt but market players are unsure if the central bank will make such a move at this week's board meeting. The Bank may be forced to increase purchases of government bonds if the country's economic slump deepens suddenly or banks start to fail, moving closer to a quantitative easing policy it has been trying to avoid.

OIL - Crude Oil Prices Soar $3 Higher

The Crude Oil's gains on Monday were helped in part by an early rally in U.S. and European stock markets on growing confidence in the banking sector, which outweighed Organization of the Petroleum Exporting Countries (OPEC) decision not to cut production target further.
The cartel which met on Sunday, decided not to cut output further, but rather concentrate on existing cuts that total 4.2 million barrels per day since September. Some analysts said OPEC's adherence to the existing cuts might be enough to offset falling demand and reverse the recent increases in oil inventories in many countries, including the world's largest oil consumer, the United States. However, in light of U.S grim economic data which confirms that long recession in the world's largest economy is far from over, the Crude might fall below $47 giving up its previous session's gains.

Article Source - EUR/USD Hits Two Months' High