Forex Trading TV Video Blog

Yesterday the US dollar continued its bullish movement against most of the major currencies. The dollar strengthened mainly against the EUR and the GBP especially after the ECB reported that inflation risks remain on the upside. While the British are experiencing a drop in inflation after their recent rate cut as indicated by yesterday’s lower CPI figures, which could now also be a concern. The EUR was traded on $1.4360 against the US dollar during the early trading hours in Europe, down from $1.4390 in New York late Wednesday, and has reached 1.4313 during noon hours in Europe. The greenback strengthened extremely into the London open with the Cable losing another 100 pips as the pair reached a low of 1.9877. The Sterling sided below 2.0000 per US dollar for the first time since September, decreasing to $1.9869 from $2.0133. The Sterling fell after a government report showed the current account-deficit widened to a record 20 billion Sterling, or 5.7% of GDP in the third quarter. As it stands at the moment, the Bank of England is on the way to another rate cut in January. However as the CPI figures indicated yesterday, falling inflation will be problematic and could halt any further rate from BoE. The US dollar has rebounded from a record low of $1.4967 per euro last month, paring its yearly drop to 8.5 percent. The dollar has advanced against all of the 16 most actively traded currencies this month, reversing its earlier negative sentiment. U.S. growth slowed this quarter to a 1% annual rate from a 4.9% rate in July to September. Fed bureaucrats forecasted already last month that the growth would slow down to as little as 1.8% by the end of next year. The Labor Department report showed that more people signed up for unemployment benefits last week, suggesting that the job market is softening. Meanwhile, this week the and Federal Reserve Bank of Richmond President Jeffrey Lacker said that the U.S. economy will be very weak in 2008 mainly regarding the housing market contracts. The Fed still makes a massive effort to moderate the economy from the worst housing recession in 16 years, cutting its key interest rate 1% in the last three months to 4.25%, the most significant since the last recession in 2001. However the string of Fed rate cuts this year has provided the housing and credit markets this year with some reprieve. So although U.S growth is expected to slowdown, we may still see underlying strength in the U.S economy which should create positive sentiment for the greenback in the New Year. Many analysts believe that we may see the greenback rebound to the 1.3500 in the next few months.

As 2007 draws to a close, the USD is making a nice comeback. Yesterday the greenback continued to gain ground against most of the majors. Even though the Fed estimates that the economic growth will be weak into next year, the USD was bought anyway as risk aversion continues to seep through the market.

The U.S. currency appreciated against the EUR and surged to a 3 month peak against GBP amid signs that financial market turmoil was starting to threaten economic growth beyond U.S. borders. In mid-afternoon trading, the USD was 0.3% higher at $1.4365. Analysts say that the greenback continues to draw strength from last week’s unexpectedly strong U.S. Retail Sales and inflation data that was seen limiting the need for the Federal Reserve to cut interest rates further next year.

Meanwhile, the U.S. Financial markets are continuing to be a significant source of uncertainty. The Federal Reserve warns that the overall economic growth will be slowed down into next year as the housing market is set to keep contracting. Home construction and sales are also unlikely to bottom out before the middle of the next year and it most likely that housing will continue to be a drag on growth well into 2008.

Looking ahead to today’s’ fundamental offerings, there are far more scheduled indicators in the lineup. The final readings on the 3rd quarter GDP could see small modifications as the GDP numbers are final figures with no further revisions expected. Therefore the figure will probably not be a market moving. GDP annualized is expected to hold unchanged at its 4 year high. Later, the Philadelphia Fed’s factory activity survey is expected slip slightly. Trading volumes are foreseen to be typically light ahead of year-end.