Pound, Euro Gain in Forex Trading

The pound and the euro are both higher in forex trading on the currency market today. While the U.S. dollar made some moves to head higher in currency trading, things have changed, with the greenback now pulling back.

Global equities are rallying, and that is providing a bit of risk appetite. Additionally, it appears as though economic data is showing signs of recovery in Europe. GFT's Boris Schlossberg reports in FX360 on the positive news coming out of the euro zone and Britain:

In Germany the GFK consumer confidence survey jumped to 3.5% from 3.0% eyed – its best reading in more than a year. The news suggests that conditions on the ground in Eurozone’s largest economy are beginning to stabilize, although a true test of that thesis will happen on Thursday after the market sees German unemployment data for June. Meanwhile stabilization was also the theme in UK where the Hometrack survey showed that prices were no longer declining with house prices holding their value for the third month in a row.

While things could change quickly in this volatile market, it does appear as though it could be a turning point fr the global economy.

Forex Trading Forecast: U.S. Dollar to Head Lower

The U.S. dollar was barely moved one way or the other by recent unemployment data. This is hardly surprising, since the news most people have been waiting for is the GDP report from Quarter 2.

After the report was released, the numbers showed that the U.S. economy shrank by 1% in the second quarter of 2009. While that still shows that the economy has been shrinking, the fact remains that the shrinkage is much lower than expected. And that is what is likely to affect the forex trading forecast for the U.S. dollar.

The indications are that the U.S. economy is slowly moving out of its recession. The latest news rekindles optimism that the economy will be out of the recession by the end of the year so that it can focus on economic recovery. As this happens, sterling and euro are expected to gain the upper hand as the greenback is no longer needed as a safe haven in currency trading.

U.S. Economy Contracts 1% in Quarter 2

The U.S. economy contracted by 1% in Quarter 2 of 2009. However, this is a smaller contraction than expected. Analysts had expected more shrinkage in the economy, reports the Financial Times:

Wall Street analysts were expecting a contraction of 1.5 per cent, but the downward revision from the original previous quarter estimate of a 5.5 per cent drop dampened optimism. ...

“Even though it’s negative, we’re not seeing the horrendous numbers we saw earlier in the year or in early 2008,” said Brian Bethune, an economist at IHS Global Insight.

The news has stoked some optimism. Even though the stock market opened lower, it has since moved into positive territory, heading higher as the news sinks in. The U.S. dollar, on the other hand, is moving lower.