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Online Forex Trading News, Anlysis, Tips, Reviews, and Videos.This morning, it looks like risk appetite has returned to the forex market after yesterday’s FOMC meeting has been fully digested.  The only thing “unexpected” from the meeting was that the decision was not unanimous, as KC Fed Chief Thomas Hoenig dissented and raised concerns


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This morning, it looks like risk appetite has returned to the forex market after yesterday’s FOMC meeting has been fully digested.  The only thing “unexpected” from the meeting was that the decision was not unanimous, as KC Fed Chief Thomas Hoenig dissented and raised concerns about possible inflation.   While this view will most probably be discounted for “an extended period” to use Fed parlance, it is interesting to see someone break from the pack.

Also, additional problems from the Euro zone have increased downward pressure on the common currency, as Portugal has now joined the mix and is showing up on the watch lists as their fiscal budget is drawing attention from the ratings agencies.  In light of these problems, the market is still in a risk-taking mood.

The other big news came from last night’s Presidential State of the Union Address, where the President issued a renewed commitment to fixing the employment problem here in the US and pledging to help put Americans back to work which overall is positive for economic growth.  Whether or not the follow through occurs is another story, but for now, the markets are satisfied.

Here’s a look at the currencies:

Aussie (AUD):  Benefitting in early trade from risk appetite, the Aussie traded as high as 90.45 vs. the US dollar.  In addition, commodity prices are higher as well.  There is much debate over whether or not another rate hike will be in order at the next policy meeting as inflation concerns abound.  Watch out for a mid-morning reversal if equity markets sell-off.

Kiwi (NZD):  Yesterday, the New Zealand Central Bank left interest rates unchanged at 2.5% as inflation is likely to stay in its target range.  However, the bank is expected to move on rates sometime before mid-year.  Also up this morning, but off of its highs.

Loonie (CAD):  With oil prices holding above (for now), the Loonie is showing decent gains this morning against the risk averse currencies.  The Loonie is showing some strength today vs. the US dollar, as it bounced back against technical resistance at 1.065.

Euro (EUR):  The Euro is down this morning after having broken support at 1.40 vs. the US dollar.  While EC economic sentiment was up this morning vs. an expected decline, the news that the first of the PIIGS countries, Portugal, may be following Greece’s lead down the road to fiscal uncertainty.   S&P is saying that Portugal’s current budget leaves the country economically “frail”.  Remember that when trading often times support becomes resistance so keep that 1.40 level in mind.

Pound (GBP):  The Pound is strong again this morning, extending yesterday’s gains.  The prevailing thought is that interest rate hikes may be on the table for the foreseeable future.

US Dollar (USD):  The dollar is down today against the commodity currencies as risk appetite has returned.  US durable goods orders came in lower than expected, and initial jobless claims came in slightly more than expected.  This lends credence to the FOMC stance that rates should remain low for “an extended period”, much to KC Fed Chief Hoenig’s chagrin. 

Yen (JPY):  The yen is down against all but the Euro currencies, as the bottom rung on the risk-taking ladder.  The uptick in risk appetite as a result of the State of the Union Address last night has helped propel Asian stock markets higher last night and the yen lower.

In world markets, the Asian stock markets closed higher than 1.5% from the previous day but stocks in Europe are mostly lower with news out of the Euro Zone.  US stock markets are down, and gold and oil are higher, to 1093 and 74.12 respectively.

What’s important to take away from all of this news is that no single instrument trades in a “bubble” and that news from around the globe can affect any market.  By having and maintaining an understanding of global events, investors and traders can better position themselves.

To learn more about how these markets are ALL inter-related, be sure to check out our extremely affordable currency trading courses!

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