Chinese Economic Growth Provides Boost for Risk Trade

The risk trade is seeing a boost today as Chinese economic growth sets a backdrop for economic recovery. Indeed, with China getting ready to lead emerging markets -- the global financial market -- into recovery in 2010, the risk trade is picking up steam, resulting in gains for the euro in forex trading against the U.S. dollar.

Boris Schlossberg reports in FX360 on the effect of China on the risk trade in the coming sessions:

Chinese economic growth may be even more important in 2010 than in 2009, given the still tepid conditions in most of the G-20 economies. Having pulled the world from the brink of a global depression China will now need to maintain its near double digit growth to accrue further capital surpluses that will be crucial for US fiscal deficit financing. However, at least for now the recovery theme remains alive and well and should provide a modicum of support for risk FX after a strong selloff over the past several weeks.

China is expected to be a helpful catalyst in global recovery, and with consumer spending picking up in the U.S. again, China should receive another boost as its exports return to high demand.

U.S. Dollar Heads Higher in Currency Trading

The U.S. dollar is heading higher in currency trading on the FX market today, thanks to an increase in risk aversion. As concerns about debt in Europe mount, the euro is showing weakness in forex trading, as is the sterling. Concerns about Greece and U.K. debt levels are quite pronounced right now.

Also contributing to uncertainty is the change in the guard for the Japanese finance minister post. Fujii is stepping down, and a new finance minister has been named.

With the greenback headed higher on the FX market, it usually means that investors are looking for a safe place to put their money, and it may mean a little weakness in the stock market today.