World Economic Forum Participants Support Bernanke
On Thursday the US senate voted to reconfirm Ben Bernanke despite fierce opposition. Bernanke faced the stiffest opposition since the confirmation of Paul Volcker in 1083. At the World Economic Forum taking place in Davos Switzerland Bernanke has many supporters. John Mack the chairman of Morgan Stanley said of Bernanke; “Ben got us through—along with a team of others—we got through a big crisis… And I’m sure there are people that would say if he was really doing his job that wouldn’t have happened. You and I both know that’s bogus. He has been in that role for a short period of time so I don’t think we’d have panic but I do think it would hurt the markets — we saw the markets sell off about 5% last week but I think the markets are feeling somewhat better because there is support and it looks like he will be voted in.”
Former President Clinton Supports Bernanke Confirmation
Former US President Bill Clinton also expressed support for Bernanke. About Bernanke’s nomination by Obama Clinton said; I will say this: I think he is right to reappoint Mr. Bernanke, for two reasons. One is that I think since this crisis occurred in September of 2008, Bernanke’s decisions have been very good, they have kept the American economy going and given us a chance to heal. Secondly, he said something that is very important to say, that the crisis occurred because regulation in the past had been too lax.” Clinton also said that Bernanke deserved the nomination because of his guidance through the worst financial crisis since World War Two.
Tight Senate Vote
The Senate voted 70 to 30 to confirm the former Princeton professor and Bernanke faced the stiffest opposition since the legislative body started confirming Fed chairmen in 1978. Bernanke faces opposition from many Republicans. Senators who supported Bernanke cited the strategies Bernanke used to address the worst recession in decades. Senator Carl Levin, a Michigan Democrat stated; “Chairman Bernanke’s performance in addressing the economic crisis and his current efforts to significantly enhance financial regulation to help prevent future crises outweigh his past mistakes.”
Exit Strategy Biggest Challenge
Many believe Bernanke’s biggest challenge will be devising an exit strategy to dismantle the various emergency measures the Fed took to address the crisis. The Fed’s low interest rates are seen as dollar negative in currency markets and investors have speculated for months when the Fed will raise rates. Despite the speculation about rates the Fed said last Wednesday that it would keep rates “exceptionally low” for “an extended period.”
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.
German Investor Confidence Falls
The euro fell against most major currencies on Tuesday pressured by persistent worries about Greece’s fiscal crisis, a rise in risk aversion and German data showed that German investor confidence fell more than expected. The decline in German investor sentiment pushed the euro to its lowest level vs. the US dollar so far this year. Dean Popplewell of OANDA, an FX brokerage in Toronto stated, “Sentiment has definitely soured based on what’s happening in Greece, and the fall in German confidence didn’t help. All we’ve seen is euro sellers across the board.” The dollar gained against most currencies due to a slide in risk sentiment among investors. The ZEW Center for European Economic Research said that the German index of investor and analyst expectations which is designed to predict economic developments six months in advance fell to 47.2, its fourth consecutive monthly decline.
Greek Crisis Affecting Other EU Nations
EU finance ministers said on Monday that Greece’s fiscal crisis is affecting other EU nations and called on the Athens government to ramp up its budget cutting measures. The Greek government now has a three year plan to bring the nation’s deficits within limits set by the EU. Moody’s Investors Service’s said that doubts about the Greek government’s ability to implement budget cutting measures prompted the ratings service3 to leave its outlook on Greece as negative. Sovereign debt risk in the EU has called the euro into question as a reserve currency. Greg Gibbs of RBS wrote in a report, “The problems in Greece will be much harder for the market to gloss over this year, and there is not a solution which appears good for the euro.”
Pound Gains on Cadbury Sale
The pound gained as much as 1% against the euro trading at 87.15 pence per euro the highest level since September 7, 2009. Consumer prices in the UK rose 2.9% in December from a year earlier the largest gain since 1997. The pound was also boosted by the announcement that Cadbury had accepted a 11.9 billion-pound ($19.7 billion USD) bid from US based Kraft Foods Inc.
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.
Dollar Gains on US Data
The US dollar rose against most major currencies on Friday bolstered by US data indicating a rise in manufacturing and stable consumer price inflation. Ongoing concerns about the Fiscal health of Greece pressured the euro despite the government’s promises to raise taxes and cut spending. Dan Cook of IG Markets in Chicago stated, “What is really crushing the euro is additional concern about the serviceability of the massive amount of debt rung up in Greece.” Euro zone finance ministers said that the Greek government misled them about the size of the nation’s budget deficits and indicated a willingness to impose sanctions if needed. The euro fell 0.9% vs. the greenback on Friday trading at $1.4373. Greece experienced its first recession in 16 years in 2009 and is widely seen as the Euro Zone’s most indebted member. Debt accounts for 120% of Greece’s Gross Domestic Product.
Dollar on Track For Further Gains
Despite mediocre US economic data some traders believe the dollar is on track for further gains. Michael Woolfolk of BNY Mellon in New York said, “It’s not a surprise to see better-than-expected manufacturing data. A point of this recovery, outside of fiscal stimulus, is that the U.S. manufacturing sector is already on the rebound.” The euro had fallen in Asian trading on rumors, later proved false, that German Chancellor Angela Merkel would resign. Last Thursday European Central Bank President Jean-Claude Trichet said that Greece would receive no special treatment and said that recovery in the Euro Zone was uneven.
New US Data Due This Week
US data due this week will likely be a focus of currency markets. Data on U.S. net capital flows, producer prices, housing starts, and initial jobless claims will be released this week and investors will be searching for clues about the direction of the US economy. Tim Evans of Lind-Waldock stated, “The markets will possibly be nervous with U.S. data that’s not favorable. If those numbers come in bearish, then that would further discount the dollar.”
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.
Canadian Dollar Strong
The Canadian dollar gained on 15 of the 16 most traded currencies approaching a three month high against the US dollar. Traders and investors believe that rising commodity prices will benefit the Canadian currency. Canada is an exporter of raw materials and rising gold and oil prices have sent the Canadian dollar higher in currency markets. Michael O’Neill of Knightsbridge Foreign Exchange Inc stated, “People still like the Canadian-dollar story, which is a fairly strong economy and expectations of rising commodity prices. What we’re seeing today is a bit of knee-jerk reaction to the retail sales numbers.” Many currency experts believe the Canadian dollar will achieve parity with its US counterpart. The Canadian dollar gained 19% in 2009. Commodity linked currencies have risen as demand for raw materials increases. The Aussie dollar also gained in currency markets on Thursday.
Aussie at Two Month High vs. Greenback
The Aussie dollar gained against most of its major competitors after Australia’s statistics bureau said that Australia gained 35,200 jobs in December. Many experts see clear signs of recovery in the Australian economy. Jane Foley of Forex.com stated, “The strength of the Australian dollar is again lending support to the Canadian dollar and the New Zealand dollar. Dismal US employment figures have added to the pressure on the greenback vs. the Canadian loonie. The Aussie hit a two month high vs. the Greenback after Australian data showed four straight months of growth lifting risk sentiment. “The strength of the Australian dollar is again lending support to the Canadian dollar and the New Zealand dollar of SEB said, “The Australian dollar is outperforming and well bid after the jobs report, plus commodities look well on track in 2010.”
Trichet’s Comments Pressure Euro
The euro weakened after remarks by ECB President Jean Claude Trichet who said that the economic outlook for the euro zone remains uncertain. Greece’s fiscal problems continue to add to the Euro’s woes. Alan Ruskin of the Royal Bank of Scotland Group Plc stated, “The euro has this overhang from Greece, which is still making headlines. There’s definitely concern around the euro periphery in general.”
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.
High Yielders Gain
High yielding commodity linked currencies reversed previous losses on Wednesday. Investors concluded that China’s tightening of monetary policies will not adversely affect China’s economy which is the world’s third largest. Omer Esiner of Travelex Global Business Payments stated, “Commodity currencies are on a much better footing today, but what happened in China is a reminder that they are vulnerable.” Eisner also dais that yesterday’s market reaction to China’s economic measures was too far and fast and investors realized that the impact of China’s monetary and economic policies will not negatively affect global economic growth. Against the yen the Aussie dollar gained 0.9% trading at 84.42 yen. The US dollar gained 0.6% vs. the yen and traded at 91.49 yen.
Euro Hits One Month High
In early trading sessions the euro hit $1.4582, the highest since December 16th 2009, and fell back to $1.4496. Demand from Asian sovereign entities supported the euro as well as several technical indicators. Nick Bennenbroek of Wells Fargo said that “moves are also starting to take on some technical significance, with the euro and pound starting to break more clearly above their early January highs.” Data which showed that the German economy contracted more than expected pared euro gains. Ongoing Greek fiscal problems have persistently pressured the euro for the last month.
Focus on Fed Beige Book
Traders and investors will be focusing on the release of the Fed’s ‘beige book’ , the Fed’s survey of economic conditions. This week also brings the US corporate earnings season and reports on weekly jobless claims and retail sales are due Thursday. Sacha Tihany of Scotia Capital in Toronto stated, “Any significant improvement (in the Beige Book reading) would be mildly bullish for the dollar in the current trading environment.” The pound rose as high as $1.6306 after Bank of England policymaker Andrew Sentence said that the Bank of England may hold back on stimulus measures. The pound was also helped by data that showed that UK industrial production figures were stronger than expected.
Quick Forex Tip: Euro currency trading requires a lot of research and investors must keep track of economic information from the twelve member nations. The economy of just one nation can affect the euro’s exchange rate. In 2010 political uncertainty and deficit concerns about Greece caused the euro to fall considerably in global forex markets. Euro currency trading can be exciting and very lucrative for investors who have done their homework.
