Forex Investing Blog

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Today is President’s Day here in the US, which is a bank and stock market holiday.  As a result, the markets are slow today with a mild risk-taking theme taking place.  All eyes are on Europe for the details of the rescue plan for Greece.  Later today, Euro zone finance ministers will be meeting and European stock indices are higher in anticipation.

Also, Chinese New Year is being celebrated to mark the Year of the Tiger, so Asian markets (that were open) closed lower.  The Chinese have much to celebrate this year as their economy is expected to continue to grow at a double-digit rate despite the government’s efforts to slow it down by curbing lending.  One of the other ways China can attempt to slow its growth is by letting its currency appreciate, according to Goldman Sachs economist Jim O’Neill who claims that, “something’s brewing”.

Here’s how the currencies are faring this morning:

Aussie (AUD):  The Aussie is up on risk-taking and the China growth story in addition to reduced fears out of the euro zone.  In addition, news out of Japan that the economy grew more than expected is good for the region’s recovery prospects.

Kiwi (NZD): Like the Aussie, the Kiwi is benefitting from improved risk outlooks primarily from Japan.  The Kiwi has been one of the worst performers vs. the US dollar over the last month as risk appetite decreased due to the Greek situation.

Loonie (CAD):  The Canadian dollar is higher this morning as risk themes are playing out and a boost from the Olympics which started this weekend.   Investors gave the Loonie a vote of confidence as Bank of Canada Governor Mark Carney spoke this weekend about maintaining fiscal prudence and highlighting the fact the Canada has the lowest debt-to-GDP ratio of all of the G-7 countries.

Euro (EUR):  The Euro is down this morning going in to the meeting to take place in Brussels later today.  The market is expecting more details over how the rescue plan that was announced last week is going to work.  The European stock markets are currently higher as risk-taking investors seek gains.

Pound (GBP):  The Pound is lower this morning ahead of a slew of economic data due out tomorrow and on the heels of a worse than expected CPI data from last week.  The UK has its own set of financial problems which have largely been overshadowed by Greece and the Euro.

Dollar (USD):   The Dollar is mixed this morning, as light volume and mild risk-taking are moving the currency.  With markets closed here in the US, less inter-market activity means lower volumes which decrease both supply and demand for long or short positions.  Expect volume to pick up tomorrow when the markets resume normal trading.

Yen (JPY):  The yen is performing as expected today, with risk-taking dominating trading.  Japan reported better than expected GDP figures, showing annualized GDP grew at 4.6% vs. the expectation of 3.5%.  This is good for stability in the world economy and has lessened the impact of the negative news out of the Euro zone.

Tomorrow could be a more volatile day as more markets re-open after the long weekend and the news out of the Euro zone meeting.  Watch for the economic data out of the UK for any signs that the recovery may be weaker than expected.  Absent of that, I expect investors to proceed cautiously as they gain confidence and resume risk-taking.

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