Forex Trading News January 2009

The euro continued yesterday’s fall declining to a 1.2833 level while the European currency would decline against the yen and the dollar due to disappointing US data which resulted in more risk aversion. European fundamentals joined bearish sentiment while unemployment increased for the fifth consecutive month to 8.0%; November noted 7.9%. Inflation is still below the ECB target of 2% as the CPI estimation printed at 1.1% and dropped under expectations of 1.4%.

Today, traders’ expectations of a soon adaptation by the US government of the bank rescue plan resulted in a fall of the yen and the US dollar against many important currencies. The decline of the dollar was also a result of the expectation that the Federal Reserve will announce extra measures to ease the credit conditions, increasing the pressure on the Greenback.

Positive news from Barclays has boosted the Pound to a 1.3840 level and has increased home loans. The British bank declared a £8 billion depreciation and also announced that it doesn’t need to use funds from the government. The 2008 profits enable the British bank to face the storm, which declined its shares by more than 30%.

The British pound dropped under support at 1.3685 with a minimum level of 1.3526 while the gross domestic product (GDP) proved that the present recession exceeds expectations. The annualised rate showed a –1.8% rate due to the initial quarterly results of a 1.5% decline which surpassed the expected 1.2% and was the weakest since 1980.

Today, the British pound declined against the Japanese yen to a record level and fell considerably against other main currencies while market participants fear that the UK recession will extend further which leaves the Bank of England no other option than cut rates even more.

Yesterday (Monday) the US markets were closed because of a national holiday. Nevertheless the pound and the euro rose during the Asian session but when the European markets opened the growth disappeared. The first US bank failure in 2009 increased the pressure on market participants and this will possibly result in risk aversion.

Last Friday the British pound gained against the euro and so did some other major currencies, due to the euro trade balance deficit. While the pound continues being a high-yielding currency, traders desire the same from the euro.

After opening with a quite large negative weekly distinction against the U.S. dollar and the Japanese yen the European currency dropped against these currencies. Traders believe that the European Central Bank will cut rates further this week.