Geithner’s Remarks Seen As Short on Substance
Equity markets failed to respond positively to Treasury Secretary Timothy Geithner’s remarks which were short on substance and details about the bank rescue package. Risk aversion returned limiting Forex investment opportunities for investors. There had been a slight return to risk appetite while markets waited got Fed President Bernanke’s and Geithner’s remarks and testimony in front of a House committee.
Geithner Not Seen as Confident
Market perception was that Treasury Secretary Geithner was not completely confident that the rescue package would work and skeptical Forex brokers sought out the safe haven and Forex opportunity provided by the dollar and the Japanese yen. Kathy Lien of GFT Forex in New York said, “Overall, what we’ve been seeing…is that (U.S. Treasury Secretary Timothy) Geithner is not 100 percent confident in their own plan and that’s causing investors to be skeptical as well. We’re still seeing risk aversion … and that’s sending investors back into the safety of the U.S. dollar and the Japanese yen.”
$1 Trillion New Lending Proposed
On Tuesday the US Treasury Department introduced a plan to clean up to $500 billion in toxic assets from banks books and an expanded Federal Reserve program to support $1 trillion dollars in new lending. Fed President Bernanke’s testimony did little to inspire investor confidence and this translated into somewhat limited Forex investment opportunities.
Risk Appetite Vanishes
The short return to risk appetite earlier in the week had investors taking advantage of the Forex opportunities offered by higher yielding currencies such as the Aussie dollar and the New Zealand dollar. The lack of confidence in the rescue package had investors returning to the safety of the US dollar and the Japanese yen.
Economic Recovery Will Take Longer
Many Forex traders and investors now believe that economic recovery will take much longer than was originally thought. Forex brokers will be watching the progress of the Obama administration closely and searching for Forex opportunities whenever possible.
Quick Forex Tip: Political conditions play a major role in global currency trading. Political instability can cause a currency to lose value. Recently political problems and deficit concerns in Greece caused the euro to fall in global currency trading centers. Market psychology although difficult to define can also affect market perceptions and can either help or pressure currencies.
