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Blogs about basic information in forex trading, forex participants and how to earn big in forex trading.Yesterday, S&P downgraded Ireland’s sovereign debt which sent bond yields higher for the troubled Euro zone nation.  However, German business confidence figures came in better than expected which has counter-balanced the regions prospects and is providing a bid for the Euro.

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Yesterday, S&P downgraded Ireland’s sovereign debt which sent bond yields higher for the troubled Euro zone nation.  However, German business confidence figures came in better than expected which has counter-balanced the regions prospects and is providing a bid for the Euro.



Here in the US, Durable goods orders came in worse than expected and yesterday’s dismal existing home sales figures shows signs that the US economy may be floundering.  This has caused speculation of further Fed quantitative easing to heat up as policy makers attempt to revive the US economy.

In Japan, the official jaw-boning has begun as Prime Minister Noda said he was prepared to take “appropriate action” to combat “one-sided” currency fluctuation.

Overnight, equity markets are lower, and the US stock futures are lower going into the open.  Oil has retreated to 71.50, and gold is higher as investors seek safe haven assets.

In the forex market:

Aussie (AUD):   The Aussie is higher this morning despite the uncertainty surrounding the elections Down Under.  As the votes are being tabulated, right now it appears to be a dead heat.  Yen weakness has provided the Aussie with a bid, and completed construction work figures came in better than expected.

Kiwi (NZD):  The Kiwi is lower on risk aversion following yesterday’s reduction in the expectation for inflation, despite overall Yen weakness.

Loonie (CAD):  The Loonie is also lower as its high correlation to oil prices has reduced demand and general risk aversion and US economic weakness reduces its prospects for economic growth.  Yesterday’s retail sales figures are still in the back of trader’s minds.

Euro (EUR):   The Euro is mostly higher to start the US session despite the Irish debt downgrade.  German business confidence figures came in better than expected to its highest reading since 2007.  This has caused yield spreads between German bonds and those of the PIIGS nations to rise.  While the PIIGS haven’t had trouble with debt offerings, higher yields could impact their ability to service that debt.  (Click chart to enlarge)



Pound (GBP):   The Pound is mostly higher with no news on the docket to affect it one way or another.  UK Treasury Minister Hoban defended the government’s austerity measures in a BBC interview, and today’s price action could be a technical bounce after 3 days of declines.  (Click chart to enlarge)



Dollar (USD):   The Dollar is trading higher vs. the commodity currencies and Yen as the US economy appears to be weakening.  Durable goods orders came in at -3.8% vs. an expectation of .5% which highlights the effect of the withdrawal of the “stimulus” funds on the economy.

Yen (JPY):   The Yen is lower as the jawboning has increased in Japan.  Speculation of intervention in the currency has increased as the Yen pulls back from 15-year highs.  In addition, export growth slowed as a result of the combination of reduced world demand and the higher Yen, yet it came in slightly higher than expectations.  Keep your eyes on this one!

It looks like extend and pretend may be coming to an end.  As the US “stimulus” plan comes to end, the economic data is starting to show that private demand is just not there.  This is mostly likely a result of government “crowding out” private business as the money came from government coffers.

However, because policy is not in place to encourage private business, unemployment remains high which reduces consumer demand which in turn causes economic growth to stagnate.  Uncertainty over financial regulation, tax policy, and health care has left business content to drive profits through reduction and not expansion.

So one would think that it’s time to change these policies, right?  Wrong.  The answer that is being talked about is either additional stimulus or further quantitative easing!  Talk about making a bad situation worse.

It is going to be interesting to see how this plays out and whether the elections here in the US bring about change in policy.  Until then, be prepared for the pain.

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

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