Euro Moves Lower in Forex Trading on Debt Concerns

The euro is moving lower in forex trading against the U.S. dollar as risk aversion remains high -- and as concern over euro zone debt takes the forefront. Euro zone member nations are seeing dangerously high debt, and this is prompting some flight away from the 16-nation currency today. GFT's Boris Schlossberg reports on euro zone debt:

The overnight drift in the EUR/USD  was triggered partially by a bearish column in UK Telegraph by Ambrose Evans-Pritchard who noted that the public debt of various EZ member nations was beginning to climb perilously close to 100% of GDP. In Spain the protracted recession could push the debt levels to 90% by 2011. In Italy the numbers are rising to 116%, Greece to 109% Belgium to 101% and France to 86%.

Of course, the U.S. isn't in a position that is much better. U.S. debt continues to grow, and California is on the verge of complete and utter meltdown. Not only is California a major component of the U.S. economy, but it is also the 8th largest economy in the world.

Both the U.S. and the euro zone have ticking time bombs of debt. The only real question at this point is this: Which will go off first?

Retail Sales Data May Not Prove the End is Near for the Recession

The U.S. dollar remains mixed in currency trading on the FX market as its performance varies depending on the currency paid. Greenback is mixed as economic data supporting major currencies provides a bit of a muddled picture. Included in this picture is economic data coming out of the U.S.

Retail sales data for June showed an improvement that was largely unexpected. GFT's Kathy Lien reports on why this positive news may not be as good as one might think:

Retail sales rose 0.6 percent in the month of June, the strongest pace of growth since January. However the increase in overall consumer spending masked underlying weakness with sales of core goods which excludes sales of cars rose only 0.3 percent (the sale of cars can be sensitive to discounts by dealers). The unseasonably cool weather in the Northeast left spending on clothing unchanged and unsurprisingly the biggest contributor to consumer spending was gas station receipts.

Indeed, it appears that once the data is broken down, things aren't as rosy as they might seem at first blush. Consumer spending on what many consider non-essentials remains sluggish. Most people do not consider increased spending on gas as a positive thing with regard to the economy, since it cuts into other consumer spending.

U.S. Dollar Lower in Forex Trading

The U.S. dollar is lower in forex trading today as risk appetite becomes the driving force in the market. The forex trading forecast should consider that, in the very short term, the U.S. dollar is likely to remain low while forex traders search for higher yields.

Indeed, the greenback is down in currency trading to the euro, sterling and Australian dollar. Forex traders want bigger returns, and good news out of the U.S. is giving them an excuse to take a few more risks to get those yields.

The U.S. stock market has opened markedly higher today, following upbeat earnings reports. This is adding to the risk appetite. Additionally, commodities (which usually move inversely to the U.S. dollar) are gaining as well.

The medium term forex trading forecast may be different, though. There are still some underlying economic issues in Europe that may mean a bit of a recovery for the U.S. dollar wants the excitement of earnings is over with. But, in the long term, as the economy begins to recover, the greenback is expected to weaken in currency trading.

Kathy Lien Talks with Bloomberg About the Canadian Dollar's Recent Boom

How much have recent  gains by commodities and stocks affected  commodity-linked currencies?

According to a recent article on Bloomberg online, Canada’s dollar gained for a third consecutive day as crude oil reached $62 a barrel from near a two-month low and copper touched a one-month high.

“We’ve had a pretty dramatic rally in the Canadian dollar in the past three trading days,” said Kathy Lien, director of currency research at GFT Forex, an online currency-trading firm in New York. “From one side, people are looking at bottoming oil prices; from the other, people see improvements in the U.S. economy.”