The forex market is the largest in the world and 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. Many forex brokers offer their own training courses and software trading platforms. Today almost all currency transactions are done electronically. The speed at which transactions can be done creates volatility in currency markets and those who want to trade forex currency must be educated and well trained.
Fortunately currency trading can be learned fairly quickly and easily. Most forex brokers will provide new investors with demo accounts where they can trade virtual currencies in real time and get a feel for forex markets. New traders can also learn about leverage which is widely available in forex markets. Leverage of 100:1 and even 400:1 are common in currency markets but must be used wisely and with caution. While leverage can lead to huge profits market volatility can also lead to huge losses if a trade goes south. Since trades can take place in seconds market shifts can take place rapidly leading to unexpected exchange rate shifts.
New forex traders must also educate themselves on the factors that affect currency markets. Political conditions, economic reports and market psychology all play a very important part in the life of those who trade forex currencies. As an example fiscal and political difficulties in Greece sent the multi nation euro plummeting on global currency exchanges. In addition credit downgrades in Spain and Portugal added to the worries about the stability of the Euro Zone. Fortunately swift and severe austerity programs caused resumed investor confidence in the euro as a currency. Currency traders must learn to follow political and economic news and interpret the results and the affect current events will have on forex markets.
All that is needed to enter this exciting market is some capital, an internet connection and an account at a forex broker. Finding a reputable forex broker is not difficult and the implementation of stricter regulations in 2009 eliminated marginal forex brokers. Increased consumer protections have made currency trading much more attractive and safer for the average small investor.
Forex markets are the world’s largest and about $3.98 trillion dollars are traded every day. Forex markets are open for business 24 hours a day (except for weekends) and most trades are done electronically. Just about any average investor can trade forex markets globally from their home computer. The foreign exchange market is unique in its size and liquidity and is widely dispersed geographically and has no central exchange. A majority of currency trades take place in London which has long been a world banking center.
There are many participants in the currency market. Central banks and large financial institutions have a long history in currency markets. Until the 1980’s forex markets were dominated by large and central banks and very wealthy individuals. To trade forex markets took millions of dollars but now forex markets have been opened to the average investor. Currency traders can take advantage of the large amounts of leverage provided to investors. Leverage of 100:1 and even 400:1 are commonly offered to investors who want to trade forex markets. Since currency movements are measured in ‘pips’ which are fractions of a cent the use of large amounts of leverage allows investors to realize decent profits from their trades.
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. A nation’s fiscal and monetary policies can have a profound effect in its currency. Balance of trades and economic growth and health are all important factors for investors to watch. Employment reports, leading economic indicators, housing and retail sales reports can all quickly affect currency markets.
Political conditions can also affect exchange rates. Political instability and unrest can adversely affect the value of any currency. Many investors watch national elections very closely and investors watch for signs of changes in domestic and monetary policy that a new administration may bring. Market psychology can have a profound effect on currency and other markets. As an example unsettling economic events can cause a flight to ‘safe haven’ assets which usually include the US dollar and the Japanese yen. Those who want to trade forex markets would be well advised to keep abreast of current political and economic events. Thanks to the internet just about anyone with an internet connection can join this exciting market and take advantage of the lucrative opportunities it can provide for investors.
The euro is the second most traded currency after the US dollar. Twelve of the fifteen countries in the European Union are members of what is known as the ‘Euro Zone’ where the euro replaced national currencies. The 12 Euro Zone countries are Germany, France, Italy, Spain, Portugal, Belgium, Luxembourg, the Netherlands, Austria, Finland, Greece and Ireland. The euro was launched in 2002 and since then has become an important currency in global currency exchange markets. The European Central Bank (ECB) now runs monetary policies in Euro Zone nations. The euro is now the second largest reserve currency replacing the German mark which long held that position.
In January of 2002 the euro traded at 1.13226 vs. the US dollar and by September 2002 had fallen to 1.01924. Since then the euro has gained considerably and now trades at about $1.4000 vs. the dollar. 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. The euro was further pressured by concerns about the economies of Italy, Spain and Portugal. Many euro currency traders feared that Greece would default on its obligations but swift and severe austerity measures saved the euro from further declines.
Euro currency trading is easy and can be done anywhere there is an internet connection. The first step is to open an account at a forex broker and download the trading platform. Many forex brokers provide new traders with free training and demo accounts and most experts recommend that new traders spend a few months trading with demo accounts before investing real money. Learning how to use and interpret the economic indicators in the Euro Zone will help euro currency trading clients to determine the mood affecting the euro’s exchange rates. There are many websites that specialize in providing daily reports related to euro currency trading and these can be a very valuable source of information.
Euro currency trading is done in currency pairs, for example the euro/US dollar. If the euro is bought and the dollar is sold then the investor is betting against the dollar. Essentially the investor bets on which currency he or she perceives as the stronger. Euro currency trading can be exciting and very lucrative for investors who have done their homework.
Harvard Professor says More EU Nations Will Need Bailouts
Former IMF economist and Harvard professor Kenneth Rogoff said that Greece will in all likelihood not be the last EU member to need a bailout. Rogoff said that Ireland, Spain and Portugal are “conspicuously vulnerable.” Rogoff told Bloomberg, “It’s more likely than not that we’ll need an IMF program in at least one more country in the euro area over the next two to three year. The budget cuts needed in Europe in many countries are profound.” Irish, Spanish and Portuguese bond yields rose and investors remained concerned about massive deficits in the three EU member nations. Last Friday Greece requested the activation of a 45 billion-euro ($60 billion) EU/IMF rescue package. All three EU countries have the highest debt to GDP ratios in the euro zone. Ireland’s deficit was 14.3% of GDP followed by Spain at 11.2% and Portugal at 9.4%. Currently Greece’s debt to GDP is 13.6%, the second highest in the euro zone. Rogoff said that the chances of other EU members needing a bailout is, “better than 50-50” and expects Greece to need more money than the original aid package provides.
Greece Needs More Austerity Measures says German Chancellor
The euro fell against most major currencies on investor concerns that the Greek bailout will not prevent Greece from defaulting. The euro fell to its lowest level since January after German Chancellor Angela Merkel said that Greece will have to adopt even more austerity measures to obtain German approval for the EU aid package. Alan Ruskin of Royal Bank of Scotland Group Plc stated, “The market doesn’t like the way the Germans are talking. There’s a complete lack of confidence in Greece. Worse and more worrisome from a euro standpoint is that contagion is continuing afoot.” Greek bonds were hammered and the premium investors are demanding to hold Greek debt exceeded 12%. The dollar advanced on the yen as investors speculate that the US Federal Reserve will withdraw stimulus measures as US recovery gathers steam.
Euro May Fall Below $1.30
According to some analysts the euro will fall below $1.30 this year if the Federal Reserve raises interest rates sooner than European policymakers. Mansoor Mohi-uddin, a Singapore currency strategist stated, “If the Fed does hike before the European Central Bank and the banks of Japan and England, the dollar will become a growth currency again rather than a safe haven. This suggests euro-dollar and pound-dollar remain at risk in 2010 of falling well below our three-month targets of $1.30 and $1.48, respectively.”
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.
Juncker Says Greek Austerity Measures ‘Ambitious and Credible’
Greece could face pressure to implement even more austerity measures when representatives of the EU, ECB and the IMF meet with the Athens government on Wednesday. The meeting was rescheduled due to disruptions in air travel caused by the massive ash cloud from an Icelandic volcano eruption. Eurogroup Chairman Jean-Claude Juncker told the Greek financial website Euro2day that 2010’s austerity measures are “pretty ambitious and look credible.” Juncker further stated, “During our talks with the troika (European Central Bank/European Commission/International Monetary Fund) on the Greek package, the possibility of new measures will be discussed.” The head of Greece’s employers’ association said he expects more cuts and newspapers predicted that tens of thousands of state contractors will find themselves without work. Most experts say that the IMF will demand further austerity measures as a condition for aid. Vassilis Korkidis, president of Greek Confederation of Trade, stated, “The IMF will certainly demand new measures for 2010, effectively proving that the current stability plan is not sufficient. The strategy of domestic deflation will plunge us further into recession.”
Greek Bond Spreads at Record Levels
Should the ash cloud continue to disrupt air travel a spokesman for the European Commission said that participants may hold a video conference. The IMF said the talks should last about fifteen days and any agreement reached would be finalized in a matter of days. On Monday Greek Finance Minister George Papaconstantinou said, “These talks are very important because they will make it possible for us to move very fast if the Greek government decides on the activation of the mechanism.” Juncker said the aid package provided by the EU and IMF would be on common terms. Juncker stated, “In no way will there be different terms from the euro zone and other ones from the IMF.” High borrowing costs are hampering Greece’s ability to finance its debt in a sustainable manner. On Monday the premium investors are demanding to hold Greek debt instead of German Bunds hit a record 482 basis points, up 40 points from Friday’s close. Juncker tried to reassure investors and stated, “What I must say is that the euro zone will assume its responsibilities. We have said it many times, there is European money when it becomes necessary.”
Borrowing Costs Driven by Speculation
Billionaire investor George Soros said that Greece’s high borrowing costs are being driven by speculation. On a news show Soros said that it will probably be necessary for Greece to tap the loan package. Soros stated, “I think it is necessary because the market interest rate is really far too high to make it possible for Greece to meet the conditions that are required of it.”
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.
