Financial Market Update

The previous week appeared to be very volatile for the US currency during Forex trading hours. The USD remained in a tight range 1.4200 and 1.4400 with no clear direction. The greenback performed a bearish activity yesterday as a result of yesterday`s parliament elections. The election outcome also pushed the Japanese yen sharply higher. The USD volatility was reasoned by mixed results from the US economy. The major data release that impacted USD behavior appeared to be the Preliminary Gross Domestic Product (GDP) report. It dropped by 1.0% in Q2 of the year, showing that the American economy continues its recession, despite some optimistic releases.

According to the Wall Street Journal, the DJIA dropped 0.4% on Friday also damped regional sentiment. DJIA futures were recently 50 points lower in screen trade.

US GDP Data Brind Dollar Fall

The period of steady appreciation for the USD has ended. The greenback experienced the essential drop the end of European trading hours. The trades closed at the level of 1.4364 against the EUR and 1.6284 against the GBP. The fall was reasoned by the following reasons: crude oil appreciation as a result of the global economy growth. The Gross Domestic Product (GDP) of the United States contracted 1.0 percent, better than 1.5 percent expected by the analysts. And it looks like the USD index will continue falling next few days.

The drop in GDP was the fourth straight one, the longest recession since quarterly records started in 1947. The world’s number one economy has shrunk 3.9 percent since last year’s second quarter. Yesterday`s report is the second of three estimates on Q2 growth. As more information becomes available the data will be revised again in September.

Euro M3 Money Supply Grew at a Slower Pace

The ECB stated on Thursday that M3 money supply in Euro-Zone rose at a slower pace of 3% in July compared to June's 3.6%. As market experts tend to think the annual growth rate will ease to 3.2%. Among the main components of M3, M1 increased 12.2% in July, up from 9.4% in June. Meanwhile, the annual rate of change of short-term deposits depreciated to minus 2.6% from 0.4% in June. Furthermore, the annual rate of change of marketable instruments dropped to minus 7% from minus 4% in the previous month. The euro-region economy barely contracted in the Q2 as Germany and France unexpectedly emerged from the decline.

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Strengthening of USD Positions

On Monday the greenback gained its positions versus major currencies traded in Forex market, from a string of recent declines after signals at the end of the week that CBs of different countries continued to carry out a policy of keeping their Interest Rates low for the near future. Technical analysis experts continue to expect that at some point signs of strength in the U.S. economy will be treated as positive for the nation's currency, ending an inverse relationship since the period of financial recession, where negative news performed a negative influence on purchasing the U.S Dollar.

The US currency also appreciated yesterday versus the EUR and Japanese Yen as Wall Street halted earlier gains and traders shifted their trading positions ahead of U.S. consumer and Housing data to be released this week. Solid U.S. data and probable reappointment of Federal Reserve Chairman Ben Bernanke pushed investors to carry out riskier transactions at the expense of the JPY and USD.

First CFD Transaction in Romania

An important event in the history of Romanian stock market. On Monday the Sibiu Stock Exchange carried out the first CFD transaction with SIF Banat-Crişana (SIF1) shares, in an overall value of 4.950 lei for the first time in the history of the home capital market. The SIF Banat-Crişana equities quoted at 0.99 lei / title, 2.94% below Friday's Forex quotes on the Bucharest Stock Exchange. Every contract for difference includes 1,000 shares, and for the transaction conducted Monday the buyer submitted a margin of 990 lei, 20% of the total value of the securities traded there.

Thecontracts for difference help the traders to take advantage of the indices in the price of shares, without effectively buy or sell the respective securities, i.e. if an investor bought a contract for difference for a single share, he did not buy the respective number of equities on the spot market, but has the possibility to gain from the difference between the bid and ask price. CFD's are similar to the futures contracts, with the difference that they have no due-date.

Positive US Indexes Data Brings Gains for USD

The last week ended with significant gains versus other major currencies. But at the same time it ended with decline against the Yen boosted up by optimistic economic figures from Japan. USD/JPY is currently traded 94.50.

The previous week started for the US index with a significant drop caused by pessimistic U.S economic figures. The Federal Budget Balance delivered a negative result, revealing a strong deficit for the federal budget. This fact accompanied by the FOCM decision to leave the interest rates at a record low level added to the USD bearishness. But however, the second half of the week brought much better results and positive releases. The CPI report managed to provide a reversal sign for USD in all Forex crosses showing signs of further recovery of USD.

This week will bring the release of Building Permits and the Producer Price Index (PPI) this Tuesday capable to influence mobile trade. The Building Permits is anticipated to perform the best figures in 8 months.

Low Economic Data Bring Dollar Fall

Yesterday`s trades were marked with a series of worse than expected economic reports. The U.S Retails Sales indicator dropped by 0.1% in July breaking all economists` expectations. The index was expected to rise by 1.8%. The U.S Core Retails Sales index also performed an unexpected drop of 0.6%. The negative data proved o show that Americans are not likely to expend their spending.

Retail sales shows the level of consumer spending so it is treated as a consumer demand and consumer confidence indicator, it may serve as a reference point for the currency market during reversal points of the economic cycle. This index is highly important for following the USA economy, as consumer demand is its main driving force. As a result the US currency reacted immediately. The Dollar dropped against all the Forex currencies. The greenback lose 100 pips at against the EUR on Thursday. The bearish trend against JPY continued.

EUR Goes on Falling against the Yen

Yesterday the EUR performed a record 1.9% loss against the Japanese Yen. The reason of such a decline appeared to be negative data from German consumer prices in July raising opinions that the ECB will maintain interest rates at a record low till the end of the year. The EUR traded $1.4154 from $1.4142 late Monday and was at 135.74 yen, down from 137.32.

The British equity market movements tend to have major affects on the Pound`s value. Even more, Forex traders are staying cautious ahead of today's BOE inflation announcement. Looking ahead to today`s events from the U.K which will likely impact the Pound for the rest of the week with the Claimant Count Change to be released at 8:30 GMT. The Euro-Zone Industrial Production report is also set to be announced at 9:00 GMT, negative results will likely put further downside pressure on the EUR.

Dollar Extends its Gains against the EUR and Pound

Yesterday`s trades were marked with USD appreciation versus European currencies such as EUR and GBP. Monday the Dollar Index, showing the Dollar position against 6 most traded currencies performed an increase of 0.4% hitting a 79.31, second consecutive week`s rise. Last week the index added 0.8 percent. Adding to the Dollar gains yesterday was the increased speculation that in the long run, the U.S. economy will probably grow at a faster pace than the Euro-Zone, Britain and Japan.

The USD's bullishness vs. the EUR continued yesterday. The rate reached its low at 1.4130 level. GBP/USD pair ended trades with a massive drop by 235 pips hitting the low of 1.6475 as a result of British banking woes revived.

Among today business events many news will come from the US economy including the release of Prelim Nonfarm Productivity and Prelim Unit Labor Costs data both at 12:30 GMT, and Wholesale Inventories at 14:00 GMT.

JPY Is the Week`s Loser

The last week`s major loser is considered to be the Yen, which suffered a lot after the release of America's Non-Farm Payroll data. The Japanese currency reached its year lows versus the EUR and GBP correspondently 138.69 and 163.08. The fall was also considerable against the Dollar as the pair hit the June`s low of 97.76.

As a result of the US NFP report, risk appetite of Forex traders rose sharply. With a surprisingly heavy news week for the Japanese currency ahead of traders, the bearishness is likely to continue this week, since many are expecting positive results which may likely boost the appetite for risk in the market and thus put additional selling pressure on the Dollar and Yen.

New US−Specific Forex Regulations

The approval of Compliance Rule 2-43(b) became effective in November, 2008, but parts of the ruling are still being implemented over time to allow for changes to Forex trading software. This new regulation is made to protect the US retail Forex trader from practices that the NFA (National Futures Association) has determined have no economic benefit to the trader. According to the NFA, this type of hedging increases the customer's financial costs by doubling the expense of entering and exiting positions. In addition, if the trader holds positions overnight, the differences in the interest rate rollover evaluation will cost customers additional money over time if they are short high yield currencies.

The National Futures Association has a website that every customer should visit for more information about their broker. Any Forex broker that is an NFA member has to meet high standards including a large minimum capital requirement to carry out business. Customers should check to see if their US Forex broker is an NFA member, and if they have any past customer complaints by doing a Background Affiliation Status Information Center (BASIC) search.

Bullish Stock Market Sentiment Brings Dollar Decline

The US Dollar ended up yesterday`s trades at the lowest level for this year against the Euro. This decline was caused by decline in US equities and pessimistic services sector figures. The greenback also slid 0.2 percent versus the JPY reaching the level of 95.02 from Tuesday`s mark of 95.25.

The broad decline of the Dollar is spurred by rally of high yielding assets such as shares and commodities. As economists and experts of technical analysis stated the Dollar's inverse relationship with trader appetite for risky assets has reasserted itself in last weeks. The USD has also lost its position as equities started a strong global rally and investors rushed into assets perceived as higher yielding ones.

Optimistic figures from China and the US boosted investors to sell Dollars choosing for trade risky assets making it complicated for the Dollar to rally a lot.

Dollar Tumbles on Optimistic Manufacturing Data

The release of better than expected figures of ISM Manufacturing PMI brought the Dollar tumbling. The indicator reached its 11 month high of 48.9. It appears to be much higher than forecasted 46.4. The improvement in U.S. construction also added to optimism. Risk appetite grew on Monday bringing decline in demand for the greenback. The U.S. currency tumbled against all major Forex currencies as traders believe that the worst of recession is over expecting sooner growth. Therefore, the Dollar declined to its 7 month bottom.

The EUR/USD pair jumped to as high as 1.4444, before ending the trades at 1.4421 level the lowest rate for 7 months. The USD fell by about 250 pips vs. the British Pound to 1.6980. One of the only currencies that the Dollar appreciated against yesterday was the Yen. Among today`s economic events, forex traders can assume volatile market. The Dollar is expected to rise against its major currency counterparts. The traders are expecting for the release of Personal Spending and Personal Income data at 12:30 GMT, and the release of U.S. Pending Home Sales at 14:00 GMT.