The coming week is going to be filled with a number of events, releases and publications that will shape the fortunes of the world’s Forex markets, but it’s the news from the UK and the US that we’re focussing on. The week ahead for traders of dollars and pounds will be filled with key events that will shape the fortunes of the USD and GBP at eToro and across the world’s Forex markets.
On Monday, the most notable event will be the release of the UK’s industry data on house price inflation, which is a leading indicator of demand in the housing market and a good indicator of the strength of the British economy as a whole. Also on Monday, the US will release a host of reports that include data on retail sales, manufacturing activity in New York and government data on net long-term securities transactions, all of which will shape the fortunes of the US dollar at Forex markets across the globe.
During today’s trading sessions, Forex traders saw the US dollar slide, with the greenback losing ground against the euro, Swiss franc and Australian dollar amidst fears of further quantitative easing measures following remarks by the chairman of the US Federal Reserve, with traders. Forex traders at eToro and other online brokers saw the EUR/USD currency pair climb by over 0.3% following the news.
However, many of you may be asking why would the suggestion of quantitative easing in the US cause the dollar to slide? Quantitative easing is a measure used by central banks to stimulate growth in a country’s economy. This is done by the purchase financial assets, which injects a predetermined quantity of money into the economy, often used to keep interest rates at a specific level. However, this practice comes with risks.
The US Federal Reserve is announced a strategy to stimulate their ailing economy by selling $400 billion of its short-term securities and exchanging them for $400 billion in long-term securities, a move that’s designed encourage lending and borrowing among US banks and businesses. However, this news caused the price of gold fall and the dollar to rise at ForexYard and other online commodities and Forex brokers.
Following the news from the Feds, the price of safe haven commodity – gold – fell by over $26 per troy ounce during Wednesday’s trading sessions. The price of gold at ForexYard fell from $1,809.10 to $1,782.60 but, most unusually, the price of silver rose during the day. Silver prices normally shadow gold prices but today things were different. As gold was shedding dollars the price of silver rose by a little under 1 per cent, while palladium and copper also made small gains.
Once again the price of gold has surpassed record highs, trading as high as $1,609.30 per ounce at eToro during the Tuesday trading sessions. The new record price for gold has come about largely due to weakened dollar and the troubled euro, as commodities and Forex traders sell dollars and euros in favour of the safe haven commodity that is gold.
Even though gold prices have retreated a little since Tuesday, at the time of writing this article gold was being sold for $1,589.53 at eToro, with no sign of a landslide fall in the precious metal’s fortunes anywhere in sight. Gold’s most recent charge is mainly due to economic issues and weak currencies on both sides of the Atlantic.
The US dollar has been through the mill recently, losing ground against many of its counterparts over the last few weeks, with investors seeking positions elsewhere. It really has been a bad month for the dollar, the worst since September, ending with the US currency falling to a 2 ½ year low, with the US Federal Reserve’s ultra-loose monetary policy seeming to be the major factor in the dollar’s recent downfall.
The only saving grace for the dollar during Friday’s trading sessions was the measures taken by traders at ForexYard and other brokers to settle positions ahead of the weekend, allowing the struggling US currency a little breathing space to recover. However, many market insiders and analysts believe that the fortunes of the dollar will continue in a similar fashion on Monday when Forex trading resumes.
Fears of inflation pushed gold prices up during Friday’s trading sessions as traders at ForexYard and other online Forex brokers saw the precious metal as a safe hedge against the impending inflation rise expected in the US. A rise in inflation will often suppress a currency, which is the US dollar in this case. And traders have been selling dollars and buying gold, which has pushed its price to new highs.
During Friday’s US trading session gold climbed by 0.9 per cent to $1,486 per ounce before declining a little. However, it wasn’t just gold that was on the move. Traders also opted for silver as a safe haven commodity as they sought risk aversion tactics as the dollar fell. Silver closed this evening at $42.57 an ounce, which is a 31-year record high for the popular precious metal. The advances of silver made an overall gain of 2.2 per cent on the week.
Even though the euro has already benefitted greatly from the predicted interest rate rise tomorrow it still continued to make headway against its US counterpart, while the Japanese yen dropped to new lows. Forex traders at eToro watched the euro soar to a 14-month high against the dollar during today’s European trading sessions, at the same time as the yen fell to a a six-month low against the dollar and an 11-month low against the euro.
Unsurprisingly, the Japanese yen has been under the cosh since the devastating earthquake and tsunami that threw the yen into a chaotic position. However, the Bank of Japan has made numerous efforts to stabilise the yen but this hasn’t stopped the Japanese currency falling further. The EUR/JPY climbed to a high of 121.97 before settling at 121.70, which the USD/JPY was up 0.2 per cent at 85.12.
Yesterday saw North and South Korea exchanging a volley of shells near to their disputed border territories and as any good skirmish does, the Korean conflict boosted gold prices at online brokers such as eToro. However, the civil unrest in Korea only managed to create a temporary spike as the strengthening dollar quickly suppressed the rising price of gold.
You may be wondering how an outbreak of military conflict can affect the price of gold, there certainly aren’t any gold plated tanks that I know of! Once news of the conflict in Korea had made its way across Asia risk aversion tactics were quickly employed. These tactics included selling local currencies against the US dollar, a popular safe haven for investors and in turn pushing up the price of gold.
According to a report from the Bank for International Settlements in April the average daily volume of Forex trading is just shy of $4 trillion. Not $4 million, not $4 billion…$4 trillion…every day! And out of all this Forex trading the US dollar is the most traded currency by a long, long way.
Being one of the world’s global reserve currencies and the most commonly used currency for worldwide international transactions it should come as no surprise to see it outstrip the likes of the British pound, Japanese yen and even the Euro.
Gold hit record highs as the dollar slumped following news from the US Federal Reserve that suggested that it may take precautionary steps to stimulate the US economy. Traders at eToro and other Forex markets across the globe witnessed the greenback’s demise, which in turn pushed the spot price of gold to an all-time record price of $1,290.70 an ounce.
The US Federal Reserve stated that it would intervene if necessary to avoid deflation but this news triggered an immediate selloff of the dollar. These proposed moves are an attempt to support the economic recovery in the US and to return inflation back in line with the Reserve’s mandate.
