Forex Trading TV Video Blog

The markets were being driven yesterday by huge swings in European Interest Rates. The moves came from the Bank of England (BoE) and the European Central Bank (ECB). The BoE slashed their benchmark Interest Rate by 150 basis points. This was 100 points more then the market had forecasted. Their intent is to boost economic growth and reduce the likelihood of a prolonged recession by stimulating consumer spending and reducing mortgage rates.

The GBP/USD shed almost 150 pips and came very close to an intra-day low of the 1.5500 mark. The greenback also made a jump against the EUR but closed down against the JPY. The JPY has continued to see gains as the markets reevaluate the USD/JPY support lines.

The unusually large Interest Rate cut by the BoE sent a clear message to the market that the British economy may be in deeper trouble then preciously expected. Rising unemployment and slowing consumer spending are strangling the economy. Combined with a lower Interest Rate, the GBP is becoming a less attractive investment after the Rate Cut.

A new report from the International Monetary Fund about global growth shows that growth prospects were dimming for the U.S. economy. The world’s largest economy may see a recession as early as next year. A reflection of this is the recent report that U.S. productivity slowed sharply during the third quarter despite efforts by businesses to keep it aloft by slashing payrolls. Productivity came out at 1.1% annual rate in the third quarter which is a significant drop from the second quarter’s 3.6%.

As for today, all eyes will be on the U.S. Non-Farm Employment Change report that is expected to post 200K less jobs for October. The change comes on the heels of job losses of 159K in September. The U.S. Non-Farm report could reverse the initial market optimism following the election of Barack Obama as U.S. president. The news surrounding this important event may have more influence in the market today, driving the Dollar potentially to the 1.2900 level.

Yesterday was an amazing trading day for the USD. The USD saw bullish trends against all its currency counterparts. The increase in the greenback’s value was most notable against the EUR as the cross feel from above 1.57 to under 1.56 and against the GBP as the cross fell from the midd 1.99’s to under 1.98. The Dollar’s rally was sparked by the better than expected S&P/CS HPI Composite-20 and Consumer Confidence Index. Simultaneously, the Crude Oil prices fell sharply, which also helped the USD gain strength.

The two economic releases that were announced yesterday both helped the bullish trends by the USD. The S&P/CS HPI Composite-20, which measures the change in the price of single-family homes in 20 metropolitan areas did drop but less than expected. More assurance was sparked by the Consumer Confidence Index which was forecasted to be lower than the previous reading, but was actually higher at 51.9.The greenback also took advantage of the drop in Crude Oil prices that occurred because of beliefs that record prices are eroding the world’s thirst for energy. The strength in the American economy was shown by the Dow Jones and S&P 500 gains of over 2% yesterday.

On tap from the US today, all eyes will be on the very important ADP Nonfarm Employment Change. This estimate by ADP, which measures the estimated change in the number of employed people during the previous month, excluding the farming industry and government, was off last month and was valued at a very low -79K. Today’s release is expected to be negative, but not as low as the previous reading and should help strengthen the USD. The other impactful release today will be the Crude Oil Inventories, which are expected to remain negative, but not as low as last week, which will be very interesting for the Crude Oil prices that are on a continuous bearish trend.