Forex Trading TV Video Blog

The greenback strengthened all across the board yesterday on the back of news that a major Abu Dhabi investment company bought a significant portion of Citigroup. Citigroup, which is a major financial institution in the U.S, was hit very hard by the recent subprime crisis and credit crunch. So this investment by the Abu Dhabi group sent out a strong signal to the market that the financial sector may be at the beginning of a recovery process and therefore this created positive sentiment for the greenback. The major U.S fianacial institutions have been exercising damage control ever since the subprime crisis began and so the fact that investors are showing renewed faith for these institutions is a very positive sign for the U.S financial sector. This news was the main driver of the greenback yesterday and although there was other negative data released it had little impact on the market. The U.S Consumer Confidence released below the expected figure of 91.5 at 87.3, but it nevertheless was unable to offset the positive momentum surrounding the greenback following the Citigroup news.

Looking ahead, today there is a string of significant data releases that investors should watch out for, kicking off with the Durable Goods figures. Both the headline and the core figures are forecasted to release stronger than the previous month and this will be a positive sign for the U.S manufacturing sector. This will be followed by the Existing Home Sales figure which will give the market another indication of whether the rate cut by the Fed is providing the struggling housing sector with some relief. Investors will also focus today on the Fed’s Beige Book report for hints with regards to future monetary. If today’s news suprises on the upside then the greenback may be able to hold off another downward slide, however it will take a lot to remove the grey cloud surrounding the greenback, so the overall trend is still bearish. Also if the Beige Book highlights a U.S economic slowdown then the greenback will face another steep decline.

U.S. stock prices declined yesterday as investors worried that rising mortgage defaults and credit market losses would have a drag on the economy. Analysts estimate that the biggest slump in real estate since 1991, turmoil in financial markets, and higher energy prices will probably slow the U.S. economy’s growth rate to 1.5% during the 4th quarter of this year.

There is still a lot of fear because of the fact that this credit contagion is continuing to widen out, further supporting speculations that more Federal Reserve interest rate cuts are imminent. Futures on the Chicago Board of Trade show traders began speculating that the Fed will lower its target rate on Dec. 11. Traders estimate an 80% chance that rates will be cut to 4.25% at that meeting.

Meanwhile, the USD remained relatively unchanged following an uneventful return from the US Thanksgiving holiday weekend. The lack of economic data gave little directional bias to start the week’s currency trading, but a busy US calendar certainly promises a pickup in volatility in the week ahead. Trading in coming days could well be driven by the housing data upon which the whole USD argument rests at the moment. If housing continues to deteriorate, it will put relentless pressure on the Fed to cut rates in December, as the EUR/USD is expected to hit the 1.500 barrier. As for today, traders are expecting the National Home Price Index to be released at 14:00 GMT. The forecast for the index is a slight decrease from -4.4% to -5.0%. Later today, the US Consumer Confidence data due to be released and is also expected to show relatively weak figures.