The global currency trading market, or forex market, has several characteristics that distinguish it from other financial markets which are:  its high daily volume which leads to high liquidity, the geographic dispersions of currency markets, 24 hour a day trading, the use of leverage in amounts not available in other markets, and the wide variety of factors that can affect currency markets. Global currency trading was once the domain of big banks and central banks but today the average investor can participate through retail forex brokers.

The primary centers for global currency trading are London, New York, Tokyo, and Singapore but banks and investors from all over the world take part in this dynamic market. There are several factors that affect global currency trading. Economic factors play a major role in determining the exchange rates of currencies. Economic factors can include government fiscal policies, GDP, employment reports, consumer confidence reports, retail sales and manufacturing indexes. Balance of trade levels, government deficits, ratio of debt to GDP are all important factors to watch for investors.

Political conditions play a major role in forex markets. 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. The imposition of severe austerity measures by the Greek government helped the euro to regain previous losses and stabilize. Market psychology although difficult to define can affect market perceptions and can either help or pressure currencies. Market psychology can prompt what is known as a flight to ‘safe haven’ currencies. This means that investors pare bets on other currencies and put their money into strong currencies such as the US dollar or Japanese yen which are considered strong currencies.

All that is needed for the average investor to take part in the exciting world of global currency trading is a computer and an internet connection. For investors who have done their homework global currency trading can lead to many profitable trades.

Greece has finally asked that the loan mechanism agreed on by EU finance ministers earlier in April be activated. Greece may need as much as 45 billion euros ($60 billion USD) this year. The request came as borrowing costs for the debt stricken nation reached unsustainable levels. The yield on Greece’s two year note hit 11% and spreads are at unprecedented levels. The euro rallied gaining a modest 0.1% vs. the US dollar trading at $1.3306 but many analysts believe the aid package will do little to solve Greece’s long term problems. Daragh Maher of Credit Agricole CIB stated, “It’s a positive development in the short term. In the longer term, it’s just a sticking plaster over the situation. The euro has not seen a sizeable bounce. It shows investors remain uncomfortable with being bullish on the euro.”  In a live broadcast Greek Prime Minister George Papandreou said, “It is a national and imperative need to officially ask our partners in the EU for the activation of the support mechanism we jointly created. The time that was not granted to us by the markets will be given to us by the support of the euro zone.” At this week’s G7 meeting Japanese Finance Minister Naoto Kan said that Europe asked the US and Japan for a show of support for Greece but did not request financial aid.

Trading Driven by Greek Concerns

Despite a rise in the German Ifo institute’s business morale index and a larger than expected increase in euro zone industrial new orders euro trading remains largely driven by Greek debt concerns. Ian Stannard of BNP Paribas stated, “It’s not economic fundamentals but the euro zone peripheries, especially Greece, that’s going to weigh on the market.” European Commission spokesman Amadeu Altafaj said that emergency loans to Greece will be processed as quickly as possible. Altafaj stated, “Everything is going to be done in such a way that the mechanism can be triggered as soon as (necessary) and as is necessary for Greece.” He said that interest rates on the loans would be calculated according to a formula worked out between EU finance ministers earlier this month. He also said that since the disbursement date was not known it was not possible to say exactly what the rates will be.

Austerity Measures Could Hamper Growth

European markets rallied briefly after the announcement as investors and analysts believe the loans are a short term solution to ongoing debt problems in the euro zone. Investors are also concerned that the imposition of further austerity measures could hamper growth and deepen Greece’s recession. Investors also worry that Greece’s problems could spread to other EU nations, most notably Spain and Portugal.

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.

The euro continued its decline on Tuesday as investors remain concerned that no solution to Greece’s fiscal crisis will be found at the upcoming EU summit. The euro fell against most major currencies on Tuesday as investors speculate that EU leaders may allow the International Monetary Fund to bailout Greece. European Central Bank President Jean-Claude Trichet indicated he is opposed to the low interest loans which the Athens government has requested.  Greece’s debt crisis has caused a political rift in the euro zone and most analysts are pessimistic that any solution will come out of Thursday’s EU summit. Omar Eisner of Travelex Global Business Payments said, “Continued bickering back and forth between EU officials is highlighting the lack of cohesion within the bloc. That is ultimately undermining demand for the single currency.” The euro fell 0.3% vs. the US dollar trading at $1.3521 in New York. The euro fell 0.2% against the yen and last traded at 122.02 yen.

Greece’s Economy to Shrink 2% in 2010

On Monday the Bank of Greece said in its 2009-2010 monetary policy report that the Greek economy may shrink 2% in 2010, twice as much as had been forecast. Greece’s budget deficit for 2009 could be as high as 12.9%, four times the EU limit of 3%. The report also said that banks will face “serious challenges” as the nation’s economy slumps and will need to diversify funding sources as the ECB cuts emergency financing. Many experts see a further decline for the euro. According to the BlueGold Capital Management LLP the euro may fall as low as $1.20. Stephen Gen of BlueGold in London stated, “This policy divergence is one of the central pillars of my view going forward. It is one more reason for investors to be cautious about the euro.” On Monday European Central Bank President Jean-Claude Trichet said that the ECB may reassess its collateral rules softening the central banks stance regarding Greece.

Pound Falls on Rate Speculation

The pound declined vs. the greenback after a report showed that UK inflation slowed more than had been forecast prompting speculation that the Bank of England will keep rates at historic lows. Chancellor of the Exchequer Alistair Darling will deliver his budget report on Wednesday as the UK government deals with a deficit that could reach 12.6 percent of gross domestic product this year. The pound fell 0.2% against the US dollar trading at $1.5076. The UK is struggling with a budget shortfall similar to Greece’s and a stalled recovery which has kept the pound under pressure. The pound could extend losses if retail sales fall short of predictions. The UK retail sales report is due March 25th.

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.

The euro had its worst week last week since January as investors remained concerned that no EU solution will be found for the Greece’s debt crisis. A report last Thursday said that the Athens government sees limited prospects for EU assistance causing concerns about the nation’s ability to service its massive debts. Greek Prime Minister George Papandreou has said that Greece may have to turn to the International Monetary Fund is no EU lending mechanism is established at next week’s EU summit. Many believe such a move would threaten the credibility of the euro. European Central Bank President Jean-Claude Trichet and many other EU officials have ruled out IMF aid to Greece but opposition to EU assistance is widespread in Germany and the Netherlands. Andrew Wilkinson of Interactive Brokers Group stated, “From the perspective of the investor, events continue to be frustratingly opaque. Repeated meetings result in no clear statement other than a commitment that now appears far less solid than before.”

Borrowing Costs High For Greece

Currently Greece is paying twice as much as other EU nations in borrowing costs making it difficult for Greece to refinance its massive debts. Prime Minister Papandreou stated, “Let everyone be certain, Greece will not default, we will not let it default. Greece has a strong government and courageous people. We are returning to the road of economic stability.” Papandreou has also called for regulation to curb speculation which he says have driven yield spreads on Greek government bonds over EU benchmarks. Papandreou said, “We are building alliances in and outside the EU. We are convincing our partners for changes to set limits to speculators. We are not asking anyone to pay our debts. We will do this by ourselves. We want to be able to implement all that we have announced and enacted calmly.”

German Opposition

German Finance Minister Wolfgang Schaeuble said that only the most ‘extreme circumstances’ could justify a bailout by EU members. Schaeuble told German newspaper Bild am Sonntag that currently no joint EU mechanism is in place for assistance to EU members. Schaeuble stated, “There is no joint instrument for EU help. So only in the most extreme case could bilaterally coordinated, voluntary help come into question. But Greece has said itself it does not need this.”The Athens government has warned that it may not be able to implement promised deficit cuts if borrowing costs remained high. Schaeuble said Greece has access to aid from the IMF. Investors will be watching the EU summit closely.

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.

The Aussie dollar gained on most major currencies after Japan’s economic growth exceeded predictions prompting demand for riskier assets. The Aussie also gained after Reserve Bank Governor Glenn Stevens said that the central bank will “likely” have to adjust policies to keep inflation within a target range of 2 to 3%. Sue Trinh of RBC Capital Markets in Hong Kong stated, “The better-than-expected headline for Japanese GDP seemed to put a floor under risky assets. Clearly, it all depends on headlines out of Greece but the market seems to be settling down and reduced volatility is typically quite favorable for risky assets.” The Aussie gained 0.2% on the Japanese yen trading at 80.02 yen and the Kiwi dollar traded at 62.92 yen. GDP in Japan, Australia’s second-largest trading partner after China, rose 4.6% in the fourth quarter, better than the 3.5% forecast by most economists.

Aussie Gains Limited by New Chinese Reserve Requirements

At present benchmark interest rates are 3.75% in Australia and 2.5% in New Zealand making both currencies attractive to investors seeking high yielding assets. Recently both currencies have been pressured by a rise in risk aversion prompted by concerns about the fiscal health of some EU member nations. Aussie gains were pared after the People’s Bank of China said that it will raise reserve requirement for banks by 0.5% on February 25th. China is Australia’s largest trading partner.

Euro Gains For First Time in Five Days

The beleaguered euro rose for the first time in five days as investors wagered that the currency’s losses due to Greece’s fiscal crisis were too rapid to be sustainable. Fiscal problems in Greece, Portugal and Spain have put enormous pressure on the euro since late last year. Greek Prime Minister George Papandreou said that Greece is ready to address the crisis and make the necessary reforms and predicted the crisis would end in the “very near future.” Omer Esiner of Travelex Global Business Payments stated, “There’s been a little moderation of concern about the debt crisis. Investors are still wary about the situation, but most of the bad news is reflected in the value of the euro. It’s come a long way down in a short period of time.” Prime Minister Papandreou told reporters in Moscow that “Greece now is indeed in a difficult economic situation but it’s not the end,” after talks with Russian leader Vladimir Putin who said, “I think, hope and believe that we’ll emerge from the situation in the very near future and emerge stronger than we are right now.”

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.

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.

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.

Austrian banking woes have further pressured the euro in currency markets. Austria nationalized Hypo Alpe-Adria Bank International AG and the Austrian press reported that the Austrian central bank and its financial market regulator have put Oesterreichische Volksbanken have put the country’s largest cooperative bank on a watchlist. A spokesman for the bank said it was not at risk of nationalization and that the press reports were inaccurate. Recently the US dollar has risen on positive US jobs and economic data. Camilla Sutton of the Bank of Nova Scotia stated, “What we are seeing recently is the improvement in some important U.S. data and rising sovereign risk in the euro zone. Both provide a bid tone to the U.S. dollar.”

Dollar Gains on Industrial Production Data

The dollar gained 1% on the euro trading at $1.4513. The dollar gained 1.6% on the yen and traded at 89.95. The yen fell 0.4% against the euro to and fell 0.5% against the pound to 89.41 U.K. pence. US industrial production increased 0.8% in November but a report from New York showed decreased industrial production during the same period showing the US economy is still struggling. Sebastien Galy of BNP Paribas SA said, “The data was positive for the dollar. It’s much safer to be short the yen, not the dollar.”

Greek Fiscal Problems Add to Euro’s Woes

Risk sentiment rose after Abu Dhabi announces a $10 billion dollar bailout for Dubai erasing previous debt concerns. Greek fiscal problems continue adding to Austria’s banking woes and sparking concerns about Euro Zone recovery. Investors are watching the ongoing Federal Reserve meeting for signs that the Fed may withdraw its stimulus programs earlier than expected. The Fed’s low rates have pressured the greenback throughout 2009 and although the dollar is now higher against most major currencies the DXY is %% lower this year. Since the release of the last US non farm payrolls report investors have been speculating that the Fed may raise rates sooner than expected.

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.

Investors have calmed down since Dubai World requested a six month moratorium on debt payments. The actions by he UAE Central Bank to provide emergency liquidity to Dubai calmed investor fears. The dollar erased last weeks gains and continues its long term decline as risk aversion eased. The dollar fell against most major world currencies as better than expected pending home sales and actions by Dubai World raised risk sentiment. Sebastien Galy of BNP Paribas SA stated, “The Dubai effect is fading. Equities have had time to rally, and the foreign-exchange market is basically following.” During the current recession currencies often follow the lead of stock and commodity markets.

Dubai World Begins Talks With Banks

The Standard & Poor’s 500 Index rose 1.3% and European stocks rose putting downward pressure on safe haven currencies such as the US dollar and the yen. Dubai World announced it has begun talks with banks to restructure $26 billion in debt and is seeking to put off payments of half of its $59 billion debt easing default fears among investors. The euro gained on the dollar after London-based Markit Economics reported that European manufacturing grew for the second straight month. The Australian dollar rose 0.6% to 92.14 U.S. after the Reserve Bank of Australia announced it would raise rates to 3.75%.

Japanese Government to Stem Yen’s Appreciation

Japan’s National Strategy Minister Kan said that the government has agreed to step in and try to stem the yen’s appreciation which is hurting exporters like industrial giants Sony and Toyota. Investors will be watching the US jobs report due December 3rd and job losses are expected to be around 480,000 up from last month’s job losses of 466,000. The report will also contain third quarter productivity and labor costs. On December 4th the non farm payrolls and unemployment report will be released and unemployment is expected to remain at 10.2% pointing to a prolonged recovery.

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.

The dollar fell against major currencies as investors and forex traders took profits on the dollar’s recent rally and concerns that US interest rates would remain near zero well into 2010. Reports showing a higher than expected rise in US inflation and decline in home construction put downward pressure on the dollar. The euro hit session highs Wednesday as a statement from a US Federal reserve official said that the central bank would tighten emergency asset purchase programs instead of raising interest rates. The euro hit $1.4977 after US inflation and housing reports were released. Federal Reserve Bank of St. Louis President James Bullard said that US policymakers may not start to raise rates until some time in 2012.

The Continuing Dollar Decline

Many traders predict a continuing dollar decline and investors are concerned about rising US debt and deficits. Sandeep Malhotra, of Clariden Leu in Zurich stated in an interview wit Bloomberg news, “Over the long term, the dollar is on a continuous decline. Given the constraints U.S. consumers are going to face going forward, given the huge debt burdens, we believe the structural divergence in growth will continue to play out.” The dollar vs. euro rate fell 0.4% to $1.4936 and against the Japanese yen the euro rose 0.7% to 133.66 The US dollar traded at 89.45 up 0.2%.

Fed Rates to Remain Near Zero

On Monday Federal Reserve Chairman Ben Bernanke said that a weak labor market and a decline in bank lending will slow US recovery and will make keeping interest rates low necessary for recovery to take place. Without a rise in interest rates the dollar will continue to be used for carry trades where investors purchase higher yielding assets and currencies with funds borrowed in countries with low rates. Antje Praefcke of Commerzbank said “Without initial rate-rise expectations, we consider a sustainable reversal in euro-dollar to be unlikely, as the dollar is likely to remain attractive for carry trades due to its low interest rates.”

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.