Good News For the Pound
The British Pound, which has taken quite a pummeling on currency markets got a bit of good news and achieved a two month high against the equally troubled Euro. The Pound also rose slightly against the Dollar as the Bank of England cut rates to a 300 year low. In am move designed to alleviate the effects of the ongoing global recession the BOE cut rates to a historic low of 1%. Stock markets were also up signaling a return to risk appetite and increased Forex opportunity.
ECB To Cut Rates in March
The European Central Bank which has been seen as behind the curve in addressing the recession in the Euro Zone failed to cut rates but indicated a slight rate cut in March. Although the BOE’s decision and the return to risk appetite produced increased Forex investment opportunities concern still remains about the state of the British banking sector. Trevor Williams, an economist at Lloyd’s stated, “The economic woes that have paved the way to today’s base rate decision will not disappear overnight. So the real question is where do we go from here?”
Pound Expected to Decline Again
Against the Pound the Euro declined to 87.33 pence and the Pound rose against the US dollar to $1.4662. Many economists believe the Pound will continue to decline during the next few months and provide limited Forex opportunity. Many currency strategists predict the Euro will also decline in the near future and the economic outlook for the Euro Zone looks bleak.
Yen Falls on Return of Risk Appetite
Some traders have been dumping the Yen and taking advantage of the Forex opportunities offered by higher yielding currencies such as the Aussie and New Zealand dollars. Credit markets continue to be impaired on both sides of the Atlantic although the US is moving to address these issues. On February Treasury Secretary Geithner will announce plans to stimulate the US banking sector.
Stock Markets Performing Well Despite Data
Stock markets have been performing surprisingly well despite the dismal news from both the US and Europe and this ,in turn, has affected currency markets and provided Forex brokers with increased Forex opportunities.
Quick Forex Tip: The forex market offers investors the opportunity to profit even during a recession. If one currency rises another must fall creating constant opportunities for savvy investors to profit from currency moves. It is not difficult to learn how to trade forex currency and there are many very well written and user friendly learning programs and training courses available for free on the internet. Besides training, the most important thing those who trade forex currencies must learn to follow political and economic news and interpret the results and the affect current events will have on forex markets.
Surprising Jump For US Home Sales
The dollar fell slightly against the Euro as surprising jump in pending US home sales had many Forex traders taking advantage of newly minted Forex opportunities. The gain was limited as many Forex traders waited to see what actions the European Central Bank would take on Thursday.
Bank of Japan to Buy Shares
The Bank of Japan announced it would buy 1 trillion Yen ($11 billion USD) of shares held by Banks in Japan. The move helped to boost risk appetite although many believe Forex opportunities provided by this move will be limited. US stocks rallied and currency markets reacted with more Forex investment opportunities.
Risk Appetite Returns
In New York the Euro edged up 1% against the dollar, trading at $1.2979. The dollar was down 0.3% against the Japanese Yen at 89.14. Pending US home sales jumped 6.3% in December as home buyers took advantage of lower interest rates and declining home prices. US banks have tightened credit requirements and the new loans are seen as solid investments. Matt Esteve of Tempus Consulting explains how the news has affected Forex opportunities, “Euro/dollar has been trading on the back of risk aversion and sentiment in the past couple of days. Any news that brings risk aversion lower and helps lift stocks at this point will hurt the dollar.” Esteve also predicted that the Euro could trade as high as $1.3250 in the near future.
Bad Euro Zone News
In Europe pressure is on the European Central Bank to cut rates further because of weak economic news coming out of the Euro Zone. German retail sales fell for the third straight quarter and producer prices in the Euro Zone fell 1.3%. All this has weighed heavily on the Euro and limited whatever Forex investment opportunities it could provide investors.
Once again we are seeing a fluctuation between risk appetite and risk aversion. These days even the slightest bit of good news has investors searching for whatever limited Forex opportunities are out there.
Quick Forex Tip: Electronic currency trading offers many advantages to the average investor. Anyone can learn how to trade currencies by using one of the many excellent training programs available online for free. In addition many retail forex brokers provide potential investors with training programs and demo accounts. Electronic currency trading offers recession proof trading because in the currency market when one currency falls another rises giving the savvy trader the opportunity to profit from the move.
Soros Most Successful Currency Trader
George Soros has made billions trading currencies. He is probably most famous for ‘breaking the Bank of England’ in 1992. Mr. Soros is notorious for taking advantage of Forex opportunities. Mr. Soros achieved fame when he took advantage of an astounding Forex opportunity and sold short $10 billion dollars worth of British pounds forcing the Bank of England to withdraw the Pound from the European Exchange Rate Mechanism and to devalue the Pound. He is estimated to have made $1.1 billion from this move.
Soros Says Euro May Not Survive
Obviously when Soros speaks currency markets listen. As a man who knows a Forex opportunity when he sees one his words carry great weight. Recently Mr. Soros made remarks to the effect that the Euro may not survive the current crisis unless the European Union insists on an international agreement addressing toxic assets. Mr. Soros stated, “One would need a type of agreement on lost capital, so that the burden is shared, and in which every country is part of, otherwise more countries will suffer. The EU should do this. If they don’t do this then the euro may not survive the crisis.”
Markets React to Remarks
Forex markets immediately reacted and the Euro declined against the US dollar and the Japanese Yen limiting any Forex investment opportunities it may have provided. Since Mr. Soros is probably the most successful currency speculators in history his words carry great weight.
Safe Haven Buying
Adding to the pressure on the Euro ECB President Jean-Claude Trichet stated that policy makers could lower the central bank’
s rates further. Dismal US unemployment figures and stock losses sent investors to the safe haven and Forex opportunity that the US dollar and the Japanese Yen provide in troubled markets.
Soros Says Another Great Depression Coming
Mr. Soros has also stated that the US banking system needs $1.5 trillion dollars to be rescued and that the current economic crisis could be worse than the great depression of the 1930’s. Hopefully he is incorrect on both counts!
Quick Forex Tip: There are many factors that affect currency exchange rates and those who want to trade forex markets should be familiar with them. Economic factors are probably the most important in determining the value of a currency. Political conditions can also affect exchange rates. Those who want to trade forex markets would be well advised to keep abreast of current political and economic events. Thanks to the internet, those with the right knowledge and an internet connection can join this exciting market and take advantage of the lucrative opportunities it can provide for investors.
