The U.S. dollar is heading higher in currency trading on the FX market today. Risk appetite is fading right now as global equities retreat, and economic data from around the world causes a reduction in global economic confidence.
Even after last week's discount rate hike, some members of the Federal Reserve Board have been making dovish comments. Additionally, commodities like gold and oil are lower today, equities are lower in Asia and Europe.
Another issue is the weakness of the German Ifo. As a result, it appears that investors are looking for a little bit of safety today, and that is driving them to the U.S. dollar.
Bernanke Insists that the Economy is Not Ready to Sustain Itself
Yesterday, the U.S. dollar was seeing a bit of a rally. At that point, it was all about risk aversion. Today, the story is a bit different. Right now, it's all about U.S. economic fundamentals.
Federal Reserve Chair Ben Bernanke is testifying before Congress today and tomorrow, and today he said that the economy is not yet sustainable. So, even though there was a boost to the discount rate last week, the Fed isn't ready to really tighten monetary policy yet.
As a result of these remarks, the U.S. dollar is lower in forex trading. Dollar bulls are disappointed that monetary tightening will not be happening anytime soon, and the euro has been waiting for a chance for a few days now.
It will be interesting to see how things go from here, and what Ben Bernanke has to say about economic progress in further testimony -- and what he plans to do in order to exit from economic stimulus while limiting inflation.
British Economy May Require More Quantitative Easing
The British economy may require more quantitative easing, according to some policymakers. While it is far from a foregone conclusion, the Bank of England is leaving the door open to further stimulus measures, according to member Posen.
GFT's Kathy Lien reports in FX360 on the possibility of quantitative easing in Britain:
Given that one of the central bank’s mandates is to keep inflation within target, the lack of inflationary pressures confirms that from a price perspective, there is no pressure to reduce stimulus. He also said a potential output drop is a big concern and because they do not know exactly how the economy will progress, they have to leave the door open on more Quantitative Easing.
Like the U.S. economy, the British economy is not yet out of the woods. The sterling is having difficulty in forex trading as the British economy struggles, and as debt mounts. Britain doesn't want to end up like Greece, and investors are concerned about the current state of things.
FOREX stands for Foreign Exchange - which means currency market. The Forex market is where currencies are sold, bought, in the form of parity. On the Forex market, all currencies are traded in real time, 24h/24h, 7J/7J. The Forex is open since few years to individuals, single investors wishing to diversify their investments or pure speculators. The access to foreign exchange market for individuals is offered through Forex Brokers.
BEWARE: FOREX is a market made volatile by the leverage which is offered to you. Consequently, a risk of important financial losses is always present. Tribuforex provides his internauts some trade ideas and analysis, but will not be responsible in case of losses. The main goal of www.tribuforex.fr is to offer a tool allowing traders to share forex between them.
