Forex Trading News June 2009

The Greenback opened this week with a rally versus various important currencies on the back of China declaring that the US Dollar could remain the major world reserve currency. China also stated that they will not switch over to another worldwide reserve currency, without serious consideration. The Australian counterpart of the US Dollar dropped for the first time since 5 days versus various currencies and the Greenback, as a reaction on the Chinese comments, reducing demand for the Aussie.

The Canadian Dollar indicates to a month-to-month fall and hardly moved against the US Dollar, due to the holiday week in the US and in Canada further on this week, which decreased trading intensity. “Both the US and Canada are being dominated by a holiday week, which results in extremely awful liquidity,” commented Firas Askari, chief currency trader in Toronto at BMO Capital Markets, a division of one of Canada’s major lenders.

The world’s largest initial public offering (IPO) within 12 months attracted investors to the main economy of South-America, which resulted in the Brazilian Real indicating its biggest gain on a weekly basis within a month. The Canadian Dollar posted its second day of gaining on the back of rising commodities and due to China repeating its request for a new global currency.

The Japanese Yen dropped today on the outlook by the Organization for Economic Cooperation and Development (OECD) which forecasted a not expected increase for the OECD nations, driving demand for high-yielding investments. The Greenback lost today versus currencies like the Aussie and the single currency on the back of rumors that a report of this Wednesday will show a decline in orders of durable goods.

Europe’s main economy continues to ease in June, proved by the German business confidence which improved for a third month. The business climate gauge rose from 84.3 to 85.9 in may and is based on a review executed under 7.000 executives by the Ifo Institute for Economic Research, a Munich-based research institution. In March the gauge proved the highest level in 26 years, while economist forecasted a rise to 85. After this report the single currency dropped to $1.3860.

The single currency did not surpass the 20-Day moving average for the second straight day, while during European trading the Euro traded close to 1.3910. The EUR/ USD pair climbed to a 1.3951 level and found support anticipating on 1.3880 during last night’s trading. However, the pair could remain trading between a taut range during the remains of the trading session, due to the lack of an impulse to restore the decrease suffered previously this week.

Markets continue to aim on the durability of the Greenback as the global reserve currency, on which the US Dollar continued its defensive position. According to analysts, the Russians were eager to discuss the necessity for a new reserve currency, while some soothing was the result of the fact that the announcement made after the conference did not refer to the US Dollar directly.

The Japanese Yen posted impressive gains against the most important high-yielding currencies on the back of falling Asian equity markets due to speculations that a survey could show a delay in US industrial production, which resulted in risk aversion sentiment among traders today. The eurozone currency rose versus the US Dollar as the German economic sentiment climbed to a higher level than estimated, which resulted in speculations of a swift recovery in the eurozone, boosting demand for the Euro.

The G-8 meeting took place in Lecce, Italy, where the finance ministers of France, Italy, the UK, Canada, Japan, Russia, the US and Germany attempted to determine an agenda for their leaders for their next congress in L’Aquila, Italy, on July 8-10. Furthermore it started to compose a strategy for reducing budget deficits and bank rescue plans as investors begin to fear inflation and the indicators point to an economic recovery.

The Euro dropped during last night’s trading on the back of disappointing fundamentals which affected risk appetite. Eurozone´s manufacturing dropped by 1.9% in April, which extensively surpassed the forecasted -0.4% and led to a -21.6% on a yearly basis. For the first time since 1957 the French Consumer Price Index (CPI) dipped into negative territory and resulted in an annualized drop of -0.3%. The overall situation in the eurozone showed declining prices while also the German wholesale price gauge fell by 8.9%; a 22-year record-high. According to the ECB, inflation will approach the 2% target again in the last quarter of 2009 before suffering a negative period during the next months.

The Japanese Yen fell versus more profitable assets and against main currencies on the back of the global recession weakening and due to increasing confidence among investors, which stimulated risk appetite. The Canadian Dollar continued to rally while Canada’s major trading partner, the US, indicates that its economy is recovering.

US President Barack Obama, striving to boost the economy, stated that there still is a lot of work to do and unveiled 10 projects which target on improving employment by generating or retaining over 600.000 jobs, according to the US government. Obama stated: “Our gauge of improvement is the improvement that the American people experience, until this improvement is stable and firm we will continue to move forward.”

The demand for commodities increased further on the back of better economic conditions, generally in Asia, which boosted the demand for currencies of developing countries, while the Brazilian Real continued to rally versus the Euro and US Dollar. The Pound Sterling dropped considerably against the US Dollar and the Euro on the back of the deepening government crisis, while Pensions Secretary James Purnell resigned.

US job losses for May are forecasted at 532.000, while the labor market points to a minor improvement as the recession weakens, according to a private report. The ADP Employer Services indicator declined more than economists estimated. The reading for April was corrected to a decrease of 545.000 employees, while the prior reading was forecasted at 491.000.

During last night’s trading the Euro reached a 1.4246 level due to the eurozone manufacturing PMI climbing, while bullish sentiment increased on the back of rising stock markets and commodity prices. The manufacturing PMI climbed from 36.8 in April to 40.7; the largest increase since 1997. The combined reading reached a seven-month high, caused by the increases in France, Italy and in Germany.