FXDragon – Learn the Forex Market

In the US the minutes of the March Federal Open Market Committee were released yesterday in Washington. Federal Reserve officials saw signs of a strengthening recovery that could be hobbled by high unemployment and tight credit and some warned of raising rates too soon.

“While recent data pointed to a noticeable pickup in the pace of consumer spending during the first quarter, participants agreed that household spending going forward was likely to remain constrained by weak labor market conditions, lower housing wealth, tight credit, and modest income growth,” minutes of the March 16 FOMC  meeting showed.

Fed officials are looking for signs of self-sustaining growth before they begin their exit from the most aggressive monetary policy in U.S. history. Payrolls rose by 162,000 last month, the most in three years and manufacturing grew at the fastest pace in more than five years.  However last month’s increase in payrolls, the third in the past five months, wasn’t enough to push down the jobless rate. The economy has lost more than 8 million jobs since the recession began in December 2007 and the unemployment rate is 9.7%.

Euro Zone investor confidence unexpectedly moved to a positive territory in April, results of a key survey showed yesterday. A measure for Euro area investor sentiment rose to 2.52 in April from – 7.48 in March, the Sentix research group said. That was the first positive figure since June 2008. Economists had predicted a reading of -5.9.

The Euro slid on markets early yesterday after a news report claimed Greece wanted to bypass International Monetary Fund involvement in a rescue. The nation’s Finance Minister George Papaconstantinou quickly responded to the report and said his government has not tried to modify the terms of the package to exclude the IMF. He said that the EU aid plan was “important” for Greece and Europe, and the nation has not sought to activate the aid plan.

However in the forex online market the Euro closed the day down 0.26% against the US Dollar at EUR 1.3363. Against the Pound the Euro dropped 0.46% to close at GBP 0.8773.

The European minimum bid rate is due to be published tomorrow at 11:45 GMT. Jean-Claude Trichet isn’t predicted to move the rate from 1%. Trichet’s words in the ECB press conference will probably shake the Euro – likely topics include the Greece agreement and the future of the European economies.

In the UK, nationwide consumer confidence figures will be published later tonight. The results of this survey were quite good last time, it rose to 80 points, the highest in two years. This time it is expected to show a further small increase. Early tomorrow the services PMI will be released. The service sector in the UK is doing very well, the last time the index showed an increase to 58.4 points, this time it is expected to have come down slightly to 58.2 points.

The Pound ended trading last week by climbing 0.55% against the US Dollar on Friday to end the week at GBP 1.5204. Yesterday against the US Dollar the Pound dropped 0.18% closing at GBP 1.5296. Against the Euro Sterling closed last week up overall and continued to rise yesterday, gaining 0.24% on the Euro to close at GBP 0.8815.

In other news in the UK, Prime Minister Gordon Brown looks set to call a general election for May 6th. The outcome of the vote may determine how quickly Britain can reduce its record budget deficit and trim national debt which looks set to double. If the election fails to result in any one party having a majority and produces a so called hung parliament investors and economists say the government may be too weak to fix the nation’s finances and this may also put the UK’s triple AAA credit rating at risk.

“The markets hate the uncertainty of the possibility of a hung parliament or the possibility of the political parties having to work in a coalition,” said Mark Wickham-Jones, professor of politics at Bristol University. “If no one is in overall control, it will make cutting the deficit difficult because the politics will push it to one side.” This year Sterling has had its worst annual start on the forex online market in 13 years, down 2.8% against the US Dollar since the beginning of the year, amid uncertainty about the possible outcome of the general election.

In the Euro Zone, last weeks recovery by the Euro against the US Dollar prompted by the announcement of the long awaited bailout package for Greece seems to be maintaining course. On the market yesterday the Euro gained 0.48% on the US Dollar and closed the day at EUR 1.3422.

The final European GDP is due to be published tomorrow morning. The figure is expected to confirm the limited growth rate of 0.1% in the fourth quarter. The German economy, the Euro Zones largest did not grow at all in the fourth quarter. Also tomorrow German factory orders will be published. The last report surprised the market with a large increase in orders of 4.3%. This time it is expected to show a small decrease.

“A weakened Euro combined with rising global demand helped boost export growth to the highest for 10 years in March,” Chris Williamson, chief economist at Market, said in a statement. “Output grew at a rate exceeded in only two periods over the 12-year history of the PMI survey as a result.”

Germany saw its best manufacturing growth in almost ten years in March, rising to 60.2 from 57.2 in February. France, the second biggest economy in Europe, saw its manufacturing sector expand at a pace not seen since November 2006.

In the UK, the Euro region’s largest trading partner, manufacturing output grew at its fastest pace in 15 years in March. The PMI rose to 57.2 in March, up from 56.5 in February, ahead of forecasts. It was the best monthly growth figure since October 1994.

Export growth fell from February’s high, but the survey showed the weak Pound was still benefiting UK exporters. Sterling has lost a quarter of its trade-weighted value over the last three years making British exports more competitive overseas. Export orders rose for a seventh month on demand from the rest of Europe, China, the US and Brazil.

Yesterday saw the Pound climb 0.20% on the Euro in the forex online market. It closed the day’s trading at GBP 0.8881.
Later today the US non-farm payroll figures are being released. The figures are released on the first Friday of every month but as today is a Bank Holiday in the major countries in the Christian world for Good Friday today’s release is a little different.

Firstly economists are predicting large gains in jobs. Previous months disappointed expectations however there are some indications that this time figures will be better. The numbers of weekly jobless claims has been falling recently from a peak of 496K to 439K last week. Also in March the government has hired workers for the census which is due in May and the non-farm payroll may reflect this. Last month low expectations led to a small positive surprise which led to gains for the US Dollar. This time high expectations could be risky for the Us Dollar.

Secondly as the figures are being released on a thin trade volume with banks closed today traders can expect to see heavy volatility in the market, especially in the EUR/USD and the GBP/USD pairs.