GBP continues to remain under pressure due to the elections

The Pound's retreated from $1.53887 high on Friday extended lower on Monday as this Forex pair reached a daily low of $1.52095. The GBP/USD closed yesterday at 1.52471 and has continued to fall in trading sessions this morning, touching on a low of 1.52103.

This morning, Britain will announce a sequence of notable reports including the U.K. Manufacturing PMI (Purchasing Managers' Index), a leading indicator of economic conditions measuring the activity of purchasing managers in the manufacturing sector (today 09:30 GMT), the Bank of England's Mortgage Approvals Report, a leading indicator of housing market activity measuring newly issued home loans, (at 0930GMT), and the U.K. Net Lending to Individuals, a gauge of consumer credit conditions (also at 0930GMT).

The Pound continues to remain under pressure from this week’s election. According to recent polls, the U.K. election is still too close to call; indicating that there is still is chance that the election may result in no party having a majority in parliament.

Without a majority calling the shots, it seems unlikely that the parliament will be able to tackle its sovereign debt problems and its budget deficit. Without guidance and direction, the government may be unable to come up with a viable plan to fight its fiscal issues, if this occurs, then look for the U.K. debt rating to be slashed at some point this year. This action will compound the weakness in the British Pound and drive the currency lower.

Currency news: The GBP/USD recovered slightly

Britain’s currency, also affected as by news of the Spanish downgrade, tumbled to a low of $1.51240 yesterday. The GBP/USD recovered slightly to close at $1.52443, down 0.29% from its opening price. This morning, a report by the Nationwide Building Society showed that housing prices in U.K rose by 1.0% in April from March. According to Nationwide data, this marks the second consecutive monthly rise of 1.0% rise, leaves house prices up by 10.5% on an annual basis.

In the United States, the Federal Reserve said yesterday that the U.S economy continues to strengthen, but that the “slack” left over from the recession was still so large that it expected interest rates to stay near zero for an “extended period”.

The labor market is beginning to improve,” the Federal Open Market Committee said in a statement yesterday in Washington, after last month saying it was “stabilizing.” Officials also said growth in household spending has “picked up recently.” Federal Reserve Chairman Ben S. Bernanke is contending with an unemployment rate that has been stuck at 9.7% for three straight months even as payrolls started to grow. Fed officials repeated that inflation is likely to be “subdued” and that consumer spending is held back by tight credit and weak income growth.

The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, was at 82.254 from 82.381 yesterday, when it rose to 82.714, the strongest since May 2009. The Dollar Index neared an 11-month high before a U.S. Labor Department report today (1330GMT) that Forex analysts said will show initial jobless applications dropped by 11,000 to 442,000.

Forex currencies' news from around the globe

The US will release the CB Consumer Confidence, a survey of 5,000 households which asks respondents to rate the relative level of current and future economic conditions including labor availability, business conditions, and overall economic situation. After slipping in February, the index recovered in March to reach 52.5 points. It’s now expected to take one step higher and rise to 54.2 points.

Later today, Federal Chairman Ben S. Bernanke will testify before the National Commission on Fiscal Responsibility and Reform. His speech will be closely watched as it comes one day before the Fed’s rate decision announcement.

In Canada, Mark Carney, governor of the BOC, will testify to parliament this week in two sessions. The first of which is this afternoon (2030GMT). Over the course of the past week, the Canadian dollar has dipped several times below the parity line with its US counterpart, and speculations continue to increase that the BOC will opt for a rate hike as early as June 1st.

Carney will make an overview of the economic situation, and may give some more hints about the imminent rate decision. The big question is if it will come as soon as June 1st, or on the next meeting scheduled for July 20th.

The Canadian Dollar continues to flutter around the parity line with the US Dollar. The USD/CAD Forex pair hit 1.00215 during afternoon European trade, the daily high, but by then end of the day the Loonie managed to erase these losses and closed at 1.00033.

Down under in Australia, The Producer Price Index grew 1% on the first quarter 2010 compared to the Q4 2009 against forecast that expected an increase of 0.6. Australian business confidence and conditions weakened slightly in the first quarter of 2010 as stronger employment growth was more than offset by an easing in retail sales, according to the National Australia Bank's quarterly business survey issued early this morning.

Business confidence fell to an index reading of plus 17 points in the first quarter, down 1 point from the fourth quarter. Despite the small drop, confidence stayed positive among all sectors of the economy, with the mining sector the strongest of all, NAB said. Meanwhile, business conditions fell to an index reading of plus 8 points, down 1 point from the prior quarter. Despite the overall strength of activity across the economy, there is little evidence of an inflationary build-up, according to the survey.

After closing at 0.92771USD yesterday, the Aussie fell this morning, hitting a low of 0.92344USD. Analysts expect the Australian Dollar to reach parity with the U.S Dollar by mid 2010.

UK Market News: The British economy still struggles to improve

The U.K economy grew half as much as expected in the first quarter of this year, highlighting that Britain still continues to struggle with its recovery.

Britain's Prelim GDP report showed a 0.2% increase from the last quarter of 2009, when a 0.4% expansion pushed Britain out of the recession.

The pound tumbled 0.4% to $1.5318 following the report, from $1.5397. The British Forex currency managed to recovery against its U.S counterpart, to close the week at $1.53749, up 0.05% from the day’s opening price. The EUR/USD closed at 0.87027, down 0.82% from the day’s opening price of 0.86318.

The US dollar advanced for the first time in three weeks against the Japanese Yen on evidence of a global economic recovery including a surge in the U.S. housing market before next week’s Federal Reserve policy meeting. After hitting a high of 94.306, the USD/JPY closed the week at 93.957.

On Friday, the US Census Bureau reported that New-Home sales jumped 27% in March, the most since April 1963. A soon-to-expire tax break combined with low mortgage rates and favorable weather sent new home sales flying past market expectations 326K, to hit 411K.

However, the department of Commerce reported on Friday, that the demand for U.S.-made durable goods dropped for the first time in four months as orders for new aircraft plunged 67%. Orders for durable goods fell 1.3% in March to a seasonally adjusted $176.7 billion after a 1.1% gain in February. However, excluding transportation goods, the core rate showed a rise of 2.8% to $136.5 billion in March, the fastest increase since the recession began in December 2007.

Canada: wholesale sales unexpectedly declined in February

Yesterday in Canada brought news that wholesale sales unexpectedly declined in February, the first drop in four months, led by automobiles and machinery. Sales declined 1.2% to C$43.8 billion (US$43.7 billion) according to figures released by Statistics Canada. Economists had expected a 1% increase.

Four of the seven wholesale categories recorded decreases in February. Motor vehicle sales fell 5.3%, the first decline since August. Machinery, equipment and supplies sales fell 2.8% while personal and household goods sales fell 1.5%.

Wholesale sales have gained 8.5% over the last year as companies sold goods out of their inventories to meet rising demand. The Bank of Canada said on Tuesday that it will begin raising interest rates to keep inflation in check as the economic rebound has been faster than expected.

Wholesale inventories rose 0.1% in February, the first increase since November 2008. The ratio of wholesale inventories-to-sales rose to 1.17 from 1.15, the first increase since August.

The agency began using a new sample of wholesalers in yesterday’s report and made other revisions to its data. Using the revised data the agency said January's wholesale sales rose 2.4%. Last month it had said wholesale sales rose 3%, the fastest in three years.

The Canadian dollar closed the day still above parity with the US dollar after hitting a low of CAD 1.00119 during Forex, it closed the day down 0.10% on yesterdays close at CAD 0.99895.

Euro Delight!

In the Euro zone German investor confidence jumped in April as falling unemployment and a weaker Euro improved the economic outlook.

The Mannheim-based ZEW Center for European Economic Research said its index of investor and analyst expectations rose to 53 from 44.5 in March. It was the first increase in seven months. Economists had predicted a gain to 45.1.

Germany’s share index has risen 3% in the past month as economic growth, which stalled during the coldest winter in 14 years, resumed. That’s outweighing concern about Greece’s fiscal crisis, which has failed to recede even after European finance ministers and the International Monetary Fund agreed on a 45 billion Euro ($61 billion) aid package for the cash-strapped nation.

The all-European figure also rose unexpectedly – it surged from 37.9 to 46 points. A figure of 38.9 was expected. The German figure is considered more accurate, however this data contributed to yesterday's rise by the Euro.

The single currency gained on the US Dollar for the second day, it appreciated 0.37% to close at EUR 1.34353.

The Canadian Dollar fell back against Dollar Sharply

In Canada manufacturing sales edged up by a weaker than expected 0.1% in February from January as weakness in the energy and auto sectors partially offset gains across a dozen industries, Statistics Canada said on Friday. Statscan also revised down its January sales growth figure to 1.8% from the 2.4% initially published.

Following the report the Canadian Dollar fell back to close down 1.06% against its American counterpart at CAD 1.01271.

The disappointing numbers suggest the economy grew at a slower pace in February than in the preceding five months. Still, analysts expect first-quarter growth to come in just as strong as the fourth quarter, at about 5% annualized. That will keep pressure on the Bank of Canada to raise interest rates either in June or July.

"We expect that, with evidence mounting that the economic recovery in Canada is on increasingly solid footing, the Bank of Canada will look to begin tightening monetary policy," Nathan Janzen, economist at Royal Bank of Canada, wrote in a note to clients.

"However, economic slack built up during the recent recession is expected to keep inflation subdued in the near term, allowing the pace of tightening to be undertaken at a gradual rate," he said.

The majority of primary dealers in Canada expect the first rate rise in July, but forex trading markets have also priced in a hike as early as June 1st.

February sales were strong in plastic and rubber products as well as in chemical products, partly the result of pharmaceutical and medical aid to Haiti following the recent earthquake. Much of the weakness came from a 3.9% drop in sales by the petroleum and coal products industry due to lower oil prices and slowdowns caused by fires at two refineries. Transportation equipment sales fell 1.8%, the second straight monthly decline as a result of temporary auto factory shutdowns and lower parts and aerospace sales.

Bond Market failed to make an Impact!

The Greek government bonds dropped as some of the world’s biggest investors said the European Union’s €45 billion bailout plan for the debt stricken nation failed to make the securities attractive.

The declines pushed the yield on the two-year note up for a second day after Pacific Investment Management Co., which runs the world’s biggest bond fund, said it’s too early to buy Greek debt and BlackRock Inc. said EU states planning to participate in a bailout must show they can withstand a “backlash” from their citizens. Moreover, Portuguese bonds declined after the EU said the government needs to do more to tackle its budget deficit. “The aid package is a safety net, but it doesn’t change the fiscal situation in Greece,” said Luca Jellinek, a senior interest-rate strategist at ANZ Banking Group Ltd. in London. “Yields are not going to fall straight away. They need to show they are successfully cutting the deficit.”

Yesterday, the Eurostat released Europe’s Industrial Production for February. While forex trading markets had expected a slight increase of 0.2%, the report showed a sharp increase of 0.9% in industrial production between February and March – indicating that the EU’s recovery in the manufacturing sector remains firmly on track.

Later today, the ECB will publish its monthly bulletin. Released one week after the central bank’s rate interest decision, this report exposes the figures that the ECB used to make its rate decision – generally the report includes hints about future policies.

Continued Good News for Canada!

Canada posted its fifth straight trade surplus in February, the longest series of reported surpluses since November 2008, adding to yet piece of evidence supporting a growing economic recovery.

Yesterday Canada’s balance of goods beat market expectations as Stats Canada reported a monthly trade surplus of C$1.40 billion ($1.39 billion), the largest surplus since October 2008. Despite a rising Canadian Dollar, exports increased 2.8% in February to C$34, led by a 7.2% gain in industrial goods and automatic products. Imports rose 0.9% to C$32.6 billion. However, despite this positive news, the Loonie was little changed at C$1.0033 per U.S. dollar following the report.

The recovery of the northern nation’s trade surplus, comes after numerous reports this year that have shown steady gains in housing and wholesale sales along with a drop in the unemployment rate.

The BOC has reportedly stated that both output and a key measure of inflation have been higher than expected, leading many economists to believe that the central bank will being raising the benchmark interest rate from 0.25% in the third quarter – well ahead of the U.S Fed.

Market Comments: Budget deficitforecast to reach a record $1.6 trillion this fiscal year

Yesterday, the U.S posted a budget deficit for a record 18th straight month in March, reflecting gains in government spending to bolster the economy. The excess of spending over revenue declined to $65.4 billion last month, compared with the $220.9 billion reported last month, according to Treasury Department figures released yesterday in Washington.

A deficit that’s forecast to reach a record $1.6 trillion this fiscal year illustrates the challenges facing President Barack Obama and Congress as they struggle to stimulate the recovery while keeping the budget gap manageable. Deterioration in the government’s balance sheet in coming years raises the risk of higher interest rates. Tonight, U.S Fed Chairman Ben Bernanke will speak. He will continue to speak tomorrow at the Joint Economic Committee where he will lay out his economic outlook.

Later today, there will be a lot of action on both sides of the US Canadian border, as both countries are set to simultaneously announce their trade balances (1330GMT). Last month, Canada reported a 0.8B surplus; however, the Canadian positive economic data was outshone by an unexpected decrease in the US trade deficit – which narrowed to 37.3billion.

This time around, the US expects its trade deficit to widen to 38.4billion, while north of the border, Canada predicts that their trade surplus will remain consistent at 0.8billion. This double event usually causes a lot of volatility in the USD/CAD pair.

The CAD

Canada added 17,900 jobs in March, fewer than the 25,900 economists had predicted, as construction and natural resources companies hired while the service industry shrank. Statistics Canada reported last Friday that the unemployment rate remained unchanged at 8.2%, despite a predicted decrease of 0.1%.

While not as strong as expected, this smaller than predicted increase represents the third straight gain in Canada’s employment level, further adding evidence of a rebound in the early part of the year.

The Canadian dollar fell as low as C$1.0084, or 99.17 U.S. cents following the release of the report, before partially retracing its steps to close at C$1.00139. It was near parity with the U.S. dollar just before the data. While over the course the day, the Loonie fell 0.113% from its opening price of C$1.00252, the CAD managed to hold on to its prior week gains- closing the week up 0.567% from Monday’s opening price.

However, this weaker than expected employment data may grant the Bank of Canada some extra time as it ponders when to withdraw the extraordinary stimulus measures from the economy.

The central bank has signaled that it won’t raise its benchmark interest rate from a record low level of 0.25% before July, unless inflation becomes a threat. With inflation already hovering near the bank's 2% target and stronger than expected data pointing to a second straight quarter of 5% annualized growth, markets had begun to price in a chance of monetary tightening in June. But most forex trading analysts believe the central bank will keep its pledge to hold rates at least until the end of the second quarter.

The Greenback Loses Momentum Across the Board

As the world continues along its arduous uphill climb toward recovery, there are a number of economies that are showing promise. For example, in the United States, one of the world's economic powerhouses, economic data indicate growth and recovery.

Still, the dollar continues to struggle as the GDP and inflation perspective are downgraded by the FOMC. Crude oil continues to hover around its highest amount of $86.75 per barrel since October of 2008. Gold has also continued to record gains, closing at $1,134 per ounce.

In Japan, growing exports continue to be the economy's saving grace and, although Japan isn't out in the clear just yet, the yen has been able to post improvements against the dollar. The USD/JPY forex trading pair traded at a low of 93.64 and a high of 94.37.

In Europe, Greece's debt crisis continues to weigh down the euro as investors do not know what to expect and how things will pan out. Still, other countries are showing growth, helping the euro stay afloat. The euro lost against the dollar with the EUR/USD forex pair trading at a low of 1.3354 and a high of 1.3496.

In UK, investors show concern over the unpredictable elections. While Construction PMI increased, the sterling fell against the dollar with the GBP/USD forex pair trading at a low of 1.5127 and a high of 1.5304.

Current happenings in Forex Market!

On Friday the Euro strengthened against the US Dollar and the Pound after EU leaders agreed on a financial aid package for Greece. The deal includes funds from the International Monetary Fund and totals around 22bn Euros which could be made available to Greece should the country have difficulty borrowing money to service its high level of debt.

Against the US Dollar the Euro rose by more than one cent to $1.3422 before falling back slightly to close trading at $1.3414 before the start of the weekend. It rose around two-fifths of a cent against Sterling to close trading at GBP 0.9003.

On Wednesday the Euro had fallen to a ten month low against the US Dollar amid fears a deal would not be reached after Germany indicated Greece did not need assistance. This followed close on the heels of a credit downgrade for Portugal which further weakened the currency.

The deal may allay fears that the problems which Greece has experienced could spread out to affect other countries in the Euro Zone. Following the announcement that a deal had been reached yields, that is the interest rate investors are paid on loans to the government, on Greek bonds fell slightly, an indication that investors viewed them as slightly less risky. Analysts feel the real test will come when Greece hold its next sale of government bonds which will almost certainly happen in the coming weeks. This will be a crucial test for Greece as well as setting the tone for what is to come in the Euro Zone.

According to Moody's credit rating agency, disagreement among Euro Zone partners could undermine the deal: "The key credit question is whether market confidence will be strengthened by the support package, or whether it will be weakened by the contentious conditions under which this package was agreed."

Further concern that the EU's rescue plan could fail arises from concerns that EU leaders may have underestimated how great the problems facing the Euro Zone are. This particular plan was drawn up in response to the Greek crisis, however there are many other members who are struggling, most notably Ireland, Spain, Portugal and Italy. Greek Prime Minister George Papandreou must now prove that he can keep the nations finances afloat as failure to do so could spark a fresh crisis and trigger the use of the aid package. Looking forward the Euro will remain heavily dependent on smooth market conditions in the short term to immediate future.

Across the water in the US, Friday saw the news that the US GDP was revised downward to an annualized rate of 5.6% for the last quarter of 2009. It was revised down from 5.9% according to figures released by the US Commerce Department.

The main factors which brought about the revision were lower levels of personal and government spending and lower levels of investment. The figure is up significantly on the 2.2% annualized rate of growth seen in the third quarter of 2009, it is also the strongest reported since the third quarter of 2003. The Commerce Department said that the pickup in inflation adjusted growth or 'real GDP' reflected rebounds in business investment in equipment and software as well as net exports.

In Japanese retail sales jumped sharply in February as government stimulus measures encouraged consumers to spend, official figures have shown. Sales rose by 4.2% from a year earlier, much more than analysts had expected. The rise happened despite falling prices in Japan, which usually encourage consumers to spend less and wait until prices fall further. Analysts said the rise was unsustainable given the deflationary pressures in Japan.

"Given the stagnant income situation, this sizeable rise in retail sales is too good to be true," said Seiji Shirashi at HSBC Securities in Tokyo. "Some government stimulus measures will continue until April and others will last until September. After these incentives expire, there should be a big negative rebound in retail sales".

On Friday the Yen fell for the fourth straight day against the Euro, its longest losing streak in five weeks as the global recovery gathers momentum boosting demand for higher yielding assets. The Yen fell to JPY 124.41 against the Euro on Friday.

In the wake of last week's budget announcement in the UK opinion polls are still showing no clear lead for either party. Pundits feel the General Election is unlikely to be called before the Easter break with a date in early May looking more likely. On Friday Sterling held on to its gains from earlier in the week, climbing 0.60% against the US Dollar to close trading at GBP 1.4894.

This week sees a relatively slow start to the week in terms of data but things will pick up on Wednesday and the end of the week will bring the release of the US Non Farm Payrolls and Unemployment reports as well as the Good Friday holiday in most trading centers.

A Shameful day for Pound!

In the UK yesterday economists warned of a "sluggish" recovery in the economy this year, ahead of tomorrow's Budget. The Confederation of British Industry said it expected the economy to grow by 1% in 2010, with the recovery remaining subdued until the middle of next year. The government forecasts growth of 1.25% this year and 3.5% for 2011. However the Chancellor, Alistair Darling, may revise those predictions in the Budget tomorrow.

After the report was released the Pound weakened further against both the US Dollar and the Euro, it closed trading down 0.36% against the Euro at EUR 0.8978.

British Consumer Price Index data is due to be released later today. Governor King from the Bank of England said yesterday that first quarter inflation was likely to be in line with the Banks forecast of 3.1%

Chancellor Alaistair Darling has reiterated there will be "no giveaways" ahead of the general election. The budget is expected to focus on encouraging private sector investment and securing long term economic growth. The government plans to halve the budget deficit - which is one of the highest in Europe and is expected to hit about 12.6% of GDP this financial year, well above the European Union threshold of 3% - over the next four years.

The Pound has had its worst annual start in the forex trading market in 13 years, dropping 7% against the US Dollar since January. The currency has been weakened by uncertainty regarding the outcome of the general election which Prime Minister Gordon Brown must call by June. The government was forced to borrow heavily during the recession resulting in one of the highest deficits in Europe. Mr. Darling has said that while there had been signs recently that the economy was improving, with unemployment falling and government borrowing lower than forecast there was still a lot of uncertainty.

He said “the mood of the times is not for giveaways. People are not daft, they know perfectly well we need to get borrowing down and secure (economic) recovery”.

The uncertainty about who will win the election and whether there will be a hung parliament has resulted in a bearish trend in Sterling. A minority government is looking increasingly probable according to recent UK opinion polls and sentiments are sharply divided between the Labor and Conservative parties on how to achieve the necessary spending cuts.

Elsewhere the Canadian Dollar fell for a third day, the longest losing streak since January as crude oil prices continued to fall. The loonie rose in 12 of the last 16 sessions to reach C$1.0062 last week, the closest to parity with the U.S. dollar since 2008. It has risen 3% this month for the second best performance among the 16 most traded counterparts against the US Dollar. South Africa’s Rand which also relies on commodities for export revenue preformed best.

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US National Capital Long Term Purchases Report Released!

The US National Capital Long Term Purchases report was published yesterday. This indicator represents the difference between foreign investments in the US and US investments abroad and demonstrates foreign confidence in the US economy. Figures showed that Net foreign purchases of long-term securities slowed markedly in January according to the Treasury Department. Total holdings of equities, notes and bonds increased a net $19.1 billion in January. This is down from $63.3 billion in the previous month. The figure had leaped to $126 billion two months ago, but was then cut to half.

The Dollar closed down significantly against the GBP in the wake of this forex trading news. It started the day trading at 1.5774 against the Pound but slid to 1.5044 at the close of the day. It also dropped against the Euro, although not as significantly, opening trading at 1.3762 before going on to close at 1.3758.

Elsewhere in the US manufacturing in the New York region expanded in March for an eighth straight month, indicating factories are sustaining production and lifting the U.S. economy. The index plunged in December but has since recovered. The report showed orders, sales and employment increased in March, a sign that manufacturing gains may last for months and help spur the rest of the economy.

The Empire State index is of interest to investors and economists primarily because it is seen as an early indicator of what the Institute for Supply Management's March national factory survey due out in two weeks may show. In February, the ISM manufacturing index inched lower to 56.5 but continued to point to solid growth in the factory sector.

US Dollar ready to face Retreat on all sides!

Last week saw the Dollar retreat on most fronts. The week ended with the USD down 2.07% against the Euro and down 2.25% against the GBP. The week ahead will be dominated by US announcements, chief amongst them being the American Fed rate decision, due out on Tuesday at 18:15 GMT.

An absence of job growth and few signs of inflation are reasons why Federal Reserve policy makers may decide to keep interest rates near zero.

Later today at 1300 GMT the Treasury International Capital Long Term Purchases report will be announced. This gauge represents the difference between foreign investments in the US and US investments abroad and shows foreign confidence in the US economy. The figure leaped to $126 billion two months ago, but was then cut to half. This time, it’s expected to stand at $38 billion.

Last week ended with Friday’s release of the University of Michigan preliminary Consumer Sentiment Index. This revealed that confidence among U.S. consumers unexpectedly declined in March, for the second month in a row. This is a strong signal that Americans are discouraged about the labor market. The prelim CSI fell to 72.5 from February’s final reading of 73.6. Economists had previously predicted that the index would increase to 74.

A separate report from the Commerce Department in Washington, also on Friday, showed that the U.S. retail sales report for February was better than expected. However, downward revisions to January sales numbers poured cold water on the result. Retail sales increased 0.3% in February and while stronger than the 0.2 percent decrease projected by economists, figures for the prior two months were revised down. January sales were revised downward to 0.1% overall.

The euro gained, bolstered by a decrease in German government bonds. The Greek debt worries are easing as the European governments continue to take action to contain the crisis. The EUR/USD forex pair traded at a high of 1.3687 and a low of 1.3620. After three consecutive days weakening against the euro and the dollar, the pound sterling was finally able to post gains. This is largely due to the inflation rates, which have risen to the highest point in over one year (since November 2008).

In Canada, the outlook was positive as more jobs than expected were created in February and the jobless rate fell to a 10-month low, cementing Prime Minister Stephen Harper’s view that the economic recovery is under way. The Canadian dollar surged after the report, strengthening to its highest level since July 2008-the Lonnie closed trading standing at $1.0191 against the USD on Friday. Employment rose by 20,900 last month, the fifth gain in seven months, Statistics Canada said. The rate of unemployment fell to 8.2 percent.

Over the weekend both the US and Canada moved in to daylight saving time. This is expected to have a significant impact on the forex trading market for the next two weeks as the major sessions between the US and the UK will overlap for five hours a day instead of four. During this time traders will have less time to react to data released in the British market before US data is released and can expect to see increased levels of volatility in the market.

Forex Trading Updates

The Euro surged to a 2-day high against the U.S. dollar yesterday, as a wave of risk demand swept the markets in the wake of upbeat economic data from both the United States and China. After suffering losses against several of its major counterpart yesterday, the USD continued to fall as the dollar index traded at 80.441 this morning, down from 80.484 late last night.

Later today (1330GMT) the U.S Department of Labor will release its first Unemployment Claims report after the release of the Non-Farm Payrolls. The market predicts that the, jobless claims will show a slight improvement – a drop from 469K to 452K, pushing the U.S dollar higher.

Also out today (1330GMT), the US and Canada will simultaneously release their trade balances. This double-feature release always triggers action in USD/CAD. For a third month the U.S trade deficit is predicted to widen slightly from 40.2B to 40.9B, as imports are expected to have grown faster than exports. North of the boarder, the market forecasts that Canada’s trade deficit will cross into a surplus of 0.3B.

Yesterday, the USD/CAD touched on a 5 month low, as the Canadian dollar continued to rise for the ninth straight day against its neighboring U.S. currency - the longest streak since 2004. The Loonie continued to trade at its strongest level in almost two months as crude oil, the nation’s largest export, neared $82 a barrel.

Tomorrow, Statistics Canada will release the nation’s unemployment change. Last month, the unemployment dropped to 8.3%, following a rapid surge in jobs of 43,000. The market expects that the number of employed people will increase by 17.5K in February, holding the unemployment rate steady at 8.3%

Risk Appetite helped US Dollar, other Currencies seems Volatile!

After closing down against the USD, for the 6th time out the past seven weeks, the Euro appreciated against 11 of its 16 major currency counterparts following French comments that helped aid risk appetite. Following the meeting between the French President Nicolas Sarkozy and Greek Prime Minister George Papandreou, the French President reportedly vowed to help Greece if needed and pledged to crackdown on market speculators targeting the country. The EUR/USD, however, has been having rather mixed reactions and continues to remain within its consolidation phase as the highly traded pair has been unable to rise toward last Wednesday’s highs of 1.3735 in the forex trading arena.

The Japanese Yen rose against the Euro, snapping a two-day drop, on speculation that Japanese companies are bringing home overseas earnings before the nation’s fiscal year ends this month. The Yen appreciated against all of its 16 major currency counterparts following China’s foreign-exchange regulator statement that speculative capital is flowing into the country, fueling optimism the funds will also boost neighboring economies. The Yen rose to 122.58 per Euro early this morning (6:38 GMT), from 123.13 per Euro in New York yesterday when it dropped to 123.90 per Euro, the weakest level since Feb. 23. Japan’s currency gained against the US Dollar, jumping from yesterday’s 89.99 to 90.31 this morning.

Across the Pacific, Australian business confidence increased in February for the second month in a row, adding to signs the economy is strong enough to sustain higher interest rates.Shortly after midnight, the National Australia Bank Ltd. (NAB) reported that both business confidence and conditions continued to strengthen in February to hit a four month high. The NAB business confidence index gained 4 points to plus-19 points in February, matching last November’s seven year high. Business sentiment in Australia is strengthening amid a rapid increase in Asian demand for Australian natural resources namely iron ore, increasing the chances that the RBA will likely raise the benchmark interest rate next month for the fifth time in six meetings. Australian advertisements for job vacancies jumped in February by the most in more than a decade as increasing Asian demand for raw materials stokes demand for skilled workers. Early this morning, the Australia & New Zealand Banking Group Ltd. (ANZ), reported that jobs advertised in newspapers and on the Internet climbed 19.1% from January, when they fell 8.1%. The increase was the biggest monthly gain since the index began including ads on the Web in 1999.

Yesterday the AUD/USD moved above the 0.90 range. Following the release of this positive economic data, the pair jumped to 0.91075, up 0.23% from the day’s open.

Later this morning (1130GMT), Australia will release the Westpac Consumer Sentiment- Survey of about 1,200 consumers which asks respondents to rate the relative level of past and future economic conditions, employment, and climate for major purchases. This indicator isn’t stable – it fell by 2.6% after rising by 5.6% beforehand. A slower rise is predicted this time.

NFP still seems to be Confused: Unemployment rate up by 0.1% to 9.8% in US

Last Friday, the US Bureau of Labor Statistics released the highly anticipated Non-Farm Employment Change, marking the end of one of the busiest weeks for the forex trading market this year.

While the U.S Non-Farm Payrolls (referred to as NFP) declined for the 25th time in the past 26th months, the world’s largest economy shed a smaller-than-expected 36,000 jobs throughout February - to a seasonally adjusted 129.5 million. For over the past year, this vital economic indicator has consistently showed a drop in the number of employed Americans. While last month analysts predicted that the NFP would re-enter positive territory and the number of employed Americans would increase by 10K, the Non-Farm Payrolls continued to fall throughout January by 20K.

Economists had predicted that the NFP for February would fall by an additional 56,000, pushing the unemployment rate up by 0.1% to 9.8%. However, Friday’s NFP showed that U.S employers cut a smaller than expected 36,000 jobs throughout February, leaving the unemployment rate steady at 9.7% - bolstering views that the labor market is on the brink of a full economic recovery.

Your browser may not support display of this image. The dollar posted its biggest five-day gain versus the Japanese Yen in two weeks, as risk appetite returned to the market following the better than expected NFP. Last week the greenback rose 1.5% to 90.28 Yen, from 88.97 on February 26th. Following the announcement of the NFP, the USD gained as much as 1.76% against the yen, the biggest intra-day move since December 11th of last year. The volatile pair closed at 90.265, up 1.3% from the day’s open.

The Canadian dollar posted its biggest weekly gain in two months versus the greenback as the improvement in its largest trading partner’s outlook could provide a boost for Canada’s economy. The USD/CAD pair fell 0.19% on Friday, as the Loonie rose to a six-week high of 0.972USD. Later today (1315GMT) will publish the number of Housing Starts for February - the number of new residential buildings on which construction was begun during the previous month. Economists expect 190,000 starts, annualized basis, up from 185,600 the previous month.

Some Strong Moves in the Forex Market!

The Euro rose 0.64% to $1.36938 against the US Dollar yesterday as Greece unveiled a new austerity package. Since news broke of Greece’s 300bn Euro debt, the single European currency has been tumbling against its major counterparts – striking a 10 month low against the dollar, this past Tuesday.

Yesterday the Greek government unveiled an austerity package worth 4.8bn Euros -a host of tax increases and spending cutbacks. Greek government officials hoped this will bolster the Euro in international markets and convince European leaders that they are doing enough to merit a possible bailout.

Retail Sales in the 16 country zone slipped in January, raising new concerns about the strength of the area’s economic recovery. According to Eurostat, sales volume within the Euro Zone fell 0.3% from December and was 1.3% lower than in January 2009. While the monthly drop in sales was weaker then the market expectations of -0.5%, economists warned that sales could continue to fall in February.

The weakness of this data cemented expectations that the European Central Bank will keep its benchmark interest unchanged at its current record low level of 1.0% (announced later today at 1245GMT). The announcement will be followed by a press conference and there is speculation that the ECB may announce that it will lend covered bonds to financial institutions as part of a strategy to increase collateral. The press conference will be closely watched by traders as it has the potential to cause huge volatility in the market due to the off the cuff format.

Across the Channel the British Pound rose across the board, appreciated against 13 out its 16 major currency counterparts – including gaining a record 0.89% against the USD, to close at $1.50959. This abrupt increase came after the Services PMI unexpectedly jumped to 58.4 from 54.5 in January. The UK dominant services sector expanded sharply to more-than-a-three-year high in February, boosted by strong new orders and business activity- adding evidence that the first-quarter GDP grew at a faster pace than in the final three months of 2009. According to senior economists at the Market, this latest piece of data highlights the underlying trend that in the private sector remains positive, and is on course to deliver a quarterly expansion above 1.0% in the first quarter. According to economists, this positive survey will reinforce the expectation that the Bank of England's Monetary Policy Committee (MPC) will not be extending its £200bn quantitative easing (QE) program (1200GMT).

At noon today, the BoE will announce whether or not it will raise its benchmark rate from its record low level of 0.5%. Forex Trading Analysts predict that the central bank is unlikely to raise change interest rates, as any raise in the cost of borrowing could jeopardize the country’s fragile economic recovery.

On the other side of the Atlantic, U.S companies, in February, cut the fewest amount of jobs in the past two years. Yesterday’s ADP Non-Farm Employment Change reported decline of 20,000, slightly higher than analysts’ prediction of -15,000, follows a revised 60,000 drop in the prior month. The results of the ADP show that companies are still hesitant to add workers until they see sustained gains in sales as the U.S emerges from the worst recession since the 1930’s. This ADP report is generally considered a predictive index for Friday’s highly awaited Change in Non-Farm Employment Change. After a slight improvement in January, the number of employed Americans is expected to fall by another 40,000.

The U.S economy continued to show signs of recovery yesterday as the, ISM non-manufacturing index rose to its highest reading since December 2007. The index increased to 53 in February from 50.5 in January - a sign that the pickup in the manufacturing is trickling down into the rest the rest of the economy.

Later today, the National Association of Realtors will announce the monthly Pending Homes Sales. The number of contracts to buy previously owned U.S. homes is predicted to have risen a mere 1.4% in January, showing the extension of a tax credit is producing a limited effect on the housing market. The renewal of a government incentive to first-time buyers, originally due to expire at the end of November, and its expansion to include current owners has yet to lure buyers back into the market after helping boost sales in 2009. A lack of jobs and mounting foreclosures have depressed confidence, indicating housing will take time to rebound.

The US Dollar closed down against major currency counterparts, particularly commodity base currencies. The CAD advanced for a fourth consecutive day against the greenback, gaining a total of 0.438% over the course yesterday, as higher crude jumped to $80.66/barrel and gold touched its highest level since January 15th. Later today, Canada will release its Ivey PMI- generally considered a leading indicator of economic health.

The week will cap off tomorrow with the release of the U.S unemployment rate – expected to increase to 9.8%, from its current level of 9.7%.

Market gears up for a very busy end to the week: ECB minimum bid rate and BoE official bank rate out tomorrow, followed by US Non-Farm Payrolls on Fri

Past Events:

• CAD Overnight Rate out at 0.25%, versus expected 0.25%, prior 0.25%
• AUD Cash Rate out at 4.00%, versus expected 4.0%, prior 3.75%
• AUD GDP q/q out at 0.9% versus expected 0.9%, prior 0.2%
• GBP Construction PMI out at 48.5, versus expected 48.9, prior 48.6
• GBP Nationwide Consumer Confidence out at 80 versus expected 71, prior 73
• EUR German Retail Sales m/m out at 0.0% versus expected -0.5%, prior 0.9%

Upcoming Events:

• GBP Halifax HPI m/m (march 3rd-5th)
• GBP Services (0930GMT)
• EUR Retail Sales m/m (1000GMT)
• USD ADP Non-Farm Employment Change (1315GMT)
• USD ISM Non-Manufacturing PMI (1500GMT)
• AUD Trade Balance (tomorrow 0030GMT)
• GBP Official Bank Rate (tomorrow 1200GMT)
• EUR Minimum Bid Rate (tomorrow 1245GMT)
• USD Non-Farm Employment Change (Friday 1330GMT)

Yesterday, the U.K released its construction PMI, showing a fall from its previous level of 48.6 to 48.5 (a number greater than 50.0 indicates expansion, while number below shows contraction). Early this morning (930GMT), the U.K will release its Service PMI- while this report is the last PMI for the week, it is the most important. The service sector, which includes the financial sector, was improving up until last month. After falling to 54.5, analysts predict a slight increase of 0.5 points this month, to a new level of 55.0.

The U.S dollar weakened across the board in Forex market, falling against 15 of its 16 major currency counterparts, following the release of the Bank of Dallas Fed Chairman’s statement that borrowing costs should continue to remain low until the economy picks up- which according to him “won’t happen for some time”.

Later today (1315GMT), the U.S will release its ADP Non-Farm Employment Change. While generally considered a predictive index for Friday’s highly anticipated Change in Non-Farm Payrolls, the ADP is expected to show a drop of 15K. With Payrolls have declined in 24 out of the past 25 months and economists are predicting another decline of 40,000 in February.

Today's Forex Market Moves!

Past events:

* USD ISM Manufacturing PMI out at 56.5 versus expected 57.7, prior 58.4
* GBP British Manufacturing PMI out at 56.6, versus expected 56.3, prior 56.6
* EUR unemployment rate out at 9.9%, versus expected 10.1%, prior 9.9%
* CAD GDP m/m out at 0.6%, versus expected 0.4%, prior 0.4%

* AUD Cash Rate out at 4.0%, versus expected 4.00%, prior 3.75%
* AUD Building Approvals m/m out at -0.7% versus expected 0.1%, prior 2.2%
* AUD Retail sales m/m out at 1.2% versus expected 0.8%,prior -0.7%

Upcoming Events:

* GBP Halifax HPI m/m (out between March 2nd to 5th)
* GBP Construction PMI (0930GMT)
* CAD overnight rate (1400GMT)

* GBP Nationwide Consumer Confidence (tomorrow 0001GMT)
* AUD GDP q/q (tomorrow 0030GMT)

* EUR Minimum Bid Rate (Thursday 1245GMT)
* GBP Official Bank Rate (Thursday 1200GMT)

The Euro continues to rally on the back of an anticipated bailout for the Greek debt crisis. Olli Rehn, the EU Commissioner for Economic and Monetary Affairs visited Greece and asked the government to announce new measures in the coming days.

Following Mr. Rehn’s comments, the Euro appreciated slightly against the USD, gaining 0.15% to reach a $1.35930. While reports suggest that German banks might help Greece by buying more Greek bonds, German Chancellor Angela Merkel denied the existence of such a plan, saying that Greece needs to sort out their own deficit problems.

Greek officials are expecting to seal a deal by Friday, when Greek Prime Minister George Papandreou is to meet with Angela Merkel in Berlin – the meeting will determine if what if any, Europe-wide assistance Greece receives.

The U.S. dollar surged against most other major currencies on Monday, after data showed the U.S manufacturing sector grew in February, although at a slower rate than expected. Manufacturing expanded in February for its seventh consecutive month, confirming that the world’s largest economy is emerging rapidly from the recession.

The greenback was up against the pound and euro, with GBP/USD plunging 2.04% to hit 1.4930 and EUR/USD shedding 0.64% to hit 1.3536. It also rose against the yen and Swiss franc, with USD/JPY rising 0.33% to reach 89.16 and USD/CHF gaining 0.72% to hit 1.0813.

U.S economy Beat Expectations

Following a six consecutive week run of gaining against the Euro, the U.S. Dollar closed on Friday down against the single European currency, posting a 0.136% loss from last week’s opening price, as worries of Greece’s debt crisis began to ease and Forex trading investors felt better regarding the Euro-zone economies.

Last week ended with the United States’ Department of Commerce announcing that U.S economy beat expectations for the last three months of 2009, and expanded at a seasonally adjusted rate of 5.9%. This rise in the Prelim GDP for the fourth quarter of last year marks the best performance for the past six years, further reflecting a rise in business investments as well as an increase in contributions from inventories. However, while the U.S economy grew slightly faster than predicted, the revision to the GDP shows that final sales within the U.S were actually weaker than those reported a month ago – as almost two thirds of the GDP’s growth was due to change in inventories, not final sales. Despite this greater than expected growth, the greenback tumbled against the Euro on Friday, as traders sold the USD to cover extreme euro short positions as speculation increased that Europe’s debt problem could soon be resolved.

Later in the day, the National Association of Realtors announced that the resale of homes and condos within the U.S plummeted 7.2%. While analysts had predicted a slight increase, sales of existing homes took a turn for the worse slipping to a new seven month low of 5.50million. After steadily rising throughout the fall of last year, sales of existing homes have fallen for the past two consecutive months. This unanticipated decrease further fueled concerns about the strength of the housing market recovery, as it follows a sharp decline in the sales of New Homes, which reportedly slipped to their lowest level on record for January.

However, The U.S. dollar index edged higher in the Asian trading session today rising to 80.42, supported at the margins by the better an anticipated GDP. Later today, the U.S. is set to publish (1500GMT) the much anticipated ISM Manufacturing PMI. For the past few months, this heavily watched purchasing managers index has been on the rise, last month jumping as high as 58.4 – this month analysts are expected it to slip back down to 57.9

What Is RSI (Relative Strength Index)?

In Forex (foreign exchange), RSI stands for relative strength index. But what exactly is RSI? RSI is a measurement of whether the market is overbought or oversold. This particular index is a gauge of extremes. While a high RSI shows that the market is overbought, a low RSI presents an oversold market. Because the RSI stretches from one extreme to another, it is considered a wide oscillator. Aside from swinging from one extreme to the other, it can show any divergence in data. If the swing is not as uniform, there is a sign of divergence. Therefore, RSI is also used by traders to observe and study patterns by which they can make their trading decisions.

The point system of RSI
In RSI, you get indices from 0 to 100. If the market is overbought, the numbers range from 70 to 100. On the other hand, if the market is oversold, numbers range from 0 to 30. Rapid RSI changes or lingering on oversold or overbought positions can serve as significant patterns that traders can look at.

The importance of RSI
RSI is important in gauging the foreign exchange market as this provides patterns that traders can rely upon when making buy, sell, or hold decisions. Though the RSI seems to be nothing more than a number, it is a great indicator of the status of the market especially if the numbers are falling within a certain range. When the numbers are within a particular range, RSI is much more accurate. RSI, however, can provide less than accurate results when the market is following a particular trend – in short, trending. Even with the possibility of inaccurate results, RSI remains one of the most trusted generators of foreign exchange market patterns. Traders can easily spot an extreme status or a divergence.

Forex News: JPY continues its slide

Forex News: JPY continues its slide

How to Really Know What Are the Best Moments to Exit a Position

In the world of foreign exchange, you must take risks. But how much risk can you handle? This is where you have to work with forex positions.
What are forex positions?
Forex positions are net total holdings of a currency. Just like the common meaning of position, a forex position is the place where you are exactly. So, when you are having terrible forex positions, it is time to let go or wait it out depending on your sense of trading adventure.
The different types of forex positions
To better know when you should exit a position, it is best to be familiar with the different forex positions first. Here are the types of forex positions:
• Short position: more currency sold than bought
• Long position: more currency bought than sold
• Flat or square position: no market exposure
• Open position: trader has bought or sold but has not closed the position yet by selling or buying back
You could say that forex positions mark your chosen strategy. If you maintain forex positions for a long time, you are more likely content with your trading results.
Forex positions and exit strategies
When do you exit forex positions effectively? There are many strategies that can be done to exit forex positions. You have to pick one that's best for you. An initial stop is ideal to save you from further losses. This gets you out of forex positions that may get you in trouble if you linger. However, some may say that getting out too early from forex positions can also prevent you from earning as much as you can. If you want to make sure you get the profit that you are hoping for, you could perform a take profit stop where you exit when you have achieved a particular number of pips you are aiming for. Exit strategies, as you can see, are strongly dependent on forex positions.

What is a Carry Trade?

The carry trade is an investment strategy which requires simultaneously borrowing short term funds and buying long term ones.


Carry trade can take several forms, from foreign exchange (Forex) strategies to credit card-related tactics.


Examples of carry trade


To use the carry trade strategy, you can borrow money through your credit card and invest it in a savings account.


Of course, the credit card should either have an interest rate of zero percent, or at least a really low interest rate during the time of borrowing. This is important so that the investment in the savings account will still be higher than the amount to be repaid.


Carry trade is sort of a nicer name for what other people refer to as stoozing. You may also make use of the carry trade strategy by borrowing low-yielding currencies while lending high-yielding currencies at the same time.


Pros and cons of carry trade

In reality, carry trade is more than just stoozing. The investment goes to investments that are much less secure than a savings account.

Though carry trade can produce high returns with smaller investments, that would all depend on luck and a lot of skill and knowledge in investing.


There is the danger of the two currencies involved in the investment changing status. So, though carry trade can produce steady returns, it can also cause great losses.