Forex News Blog
Back to The Headlines
Tuesday June 2, 2009 - 17:14:40 GMT
Share This Story
FX Solutions - www.fxsol.com
driving the Dollar seem to vary with the
season. Last fall at the height of the financial crisis safe haven flows trumped
all considerations; at one point investors accepted zero return for the security
of holding US debt. The Dollar rose 17%
against the Euro in a month and made
similar gains versus the Pound Sterling, the Canadian Dollar, the Swiss
Franc and the Australian and New Zealand
Dollars. But even at maximum market panic Dollar superiority was not total; the
imploding Yen carry trade drove the Dollar down against the Yen to 90 to the Dollar despite the huge inward flows to US
The Dollarâ€™s virtues
last fall were very specific; in a catastrophe everyoneâ€™s first choice for
safety was American debt. The Dollarâ€™s
competitive value was not the point, only its supposed security mattered. But
those conditions could not last, and as the financial crisis became an economic
crisis and the threat of financial system collapse waned the fear of wholesale
loss of investment principal ebbed. In moderating circumstances the funds that
had been stashed in the States for safety
(and little or no return) began to be withdrawn seeking other more productive
currencies and investments.
degree of panic into the Dollar last fall
guaranteed a correction out of the Dollar; but until the recent move that began on
May 20th, the Euro had stayed below the
38% Fibonacci retracement level of the July to October 2008 collapse.
dollar equilibrium held from mid March until mid May with the pair largely
confined to the range of 1.3100 and 1.3600. The original burst through that
range on March 18th and 19th was prompted by the Federal Reserve announcement
that it would buy Treasury Notes in an effort to keep consumer and mortgage
interest rates low; this was the so called â€˜quantitative easingâ€™ policy. The
Federal Reserve Board knew that the amount of US debt scheduled for sale to the
credit markets in the months ahead could undermine its low rate policy.
Mortgage rates are not set by Fed fiat but take direction from the
credit markets and one of the important
market benchmarks are US Treasury rates. The initial market reaction to the Fed
quantitative policy was extremely negative for the Dollar with the Euro gaining seven hundred points in two days.
But despite the Fed announcement traders
seemed to forget, the market absorbed that news and the Dollar regained all that it had lost after March
Enter the budget of the new American administration and its blueprint for the US economy. Treasury rates at
the long end of the yield curve have been rising since March. The ten year note
has gained 1.5% in yield in that time. The bond market clearly anticipated the
impact of the governmentâ€™s financing plans well before the actual auctions
began. But the turmoil in the bond market
did not dramatically affect the currency markets until last week.
classic economic comparison higher interest rates are one of the prime drivers
of a currencyâ€™s worth. US rates are clearly headed higher, though not at the Federal Reserve level, but
the Dollar has moved from strength to
weakness. Gone is the Dollar support from the
expectation that the US economy, under the spur of historically low rates
and massive fiscal stimulus, will be the first industrial economy to leave the
recession. Gone is the credit to the Fedâ€™s early acknowledgement of the
financial crisis and actions to mitigate the recession.
The correction out of Dollar assets will run its
course. But the currency market focus
on the amount of Fed quantitative
easing, on the US deficit and future inflation, will
remain. There is little confidence that a government as indebted as
Washington will be able to withdraw the liquidity flooding the US financial
system. The may even be the suspicion that Washington will realize that
monetizing the debt is probably the only politically realistic course to
alleviate the debt burden
The same proactive Fed and government policies
that only a few months ago were seen as strongly supportive of the US economy
and the US Dollar are now the Dollar's nemesis. Is the Treasury is the new driving force behind
the Dollarâ€™s fall?
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."
Actionable trading levels delivered to YOUR charts in real-time.
Register To Test Your Amazing Trader
GVI Trading. Potential Price Risk Scale
Tue 17 July 2018
AA: Major, A: High, B: Medium
AA 08:30 GB- Employment
A 13:15 US- Industrial Production
AA 14:00 US-Powell Testimony
Wed 18 July 2018
AA 08:30 GB- CPI
A 12:30 US- Housing Starts/Permits
AA 14:00 US-Powell Testimony
Thu 19 July 2018
AA 1:30 AU- Employment
AA 08:30 GB- Retail Sales
A 14:30 US- EIA Crude
A 12:30 US- Weekly Jobless
Fri 20 Jun 2018
A 12:30 CA- CPI/Retail Sales
John M. Bland, MBA
co-founding Partner, Global-View.com
Global-View Affiliate Program
We are starting an affiliate program to market some of our products.
Send me an email if you would be interested or if you know someone who would like to be an affiliate. Generous commissions payout for those accepted.
Put the word "affiliate" in the email subject line.
Start trading with forex broker Markets Cube
Max McKegg's Daily Forex Trading Forecasts
Veteran FX Trader, Max McKegg, forecasts all the Major currencies and the Australasians; providing Daily and Medium Term Trading forecasts to subscribers, who include large Banks the world over, as well as individual traders in more than 30 different countries.
Request a TRIAL of Max's Forex Service.