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The British pound like all the major currencies such as the Euro has been hit hard by inflation and weaker consumer spending.

The Confederation of British Industry distributive trades survey has hit its lowest ever since November of 1992.

The weaker consumer spending has been blamed on a lot of reasons, among them the Easter holiday and poor weather, but the primary reason why consumers are tightening their belts is the weakening housing market.

Already, conditions are bad enough, but the worse is yet to come. This might force the Bank of England to pare down interest rates once more despite growing inflationary pressures.

However, such a measure, while easing inflationary impact on consumers, may only cause the pound to sink even deeper.

Inflation will most likely hover somewhere around 3 percent target for longer than initially anticipated, said BoE Governor King this morning.

Although not readily apparent, these rather hawkish comments run in conflict with the rapid decline in mortgage approvals and the possibility that in the near future, there will be major layoffs in the UK.

Photo Credit: ArchiM

One of the basic questions people ask about Forex is the cost to get started. Many erroneously believe that trading in currencies involves a huge sum of money. This was indeed true in the past. However, nowadays, nothing could be further from the truth.

Before the Internet became of wide use, only the very rich, the very influential, or large financial institutions can trade currencies.

Forex was at one time a game confined only to the elite. Back then, sometime during the 90s, the initial capital a Forex trader would need can range from 10 to 50 million dollars. That’s a large sum of money.

But now, things have changed. The rise of the Internet has made it possible for online trading companies to flourish, making Forex reachable to retail traders like you and I.

Before you can get started, you need to have a computer with a high speed internet connection.

Next, you set up an online currency trading account. Now you’ll be surprise by just how much initial investment you have to put up. Your initial investment can be as low as $200, for a micro account, to as high as $10,000, for a mini account. Of course there’s almost no limit as to how high you are willing to invest.

Generally it is best to start slow. Invest an amount that’s comfortable for you. That way, if things didn’t turn out well you wouldn’t get burned either. The fact that anyone can start trading currencies with very low initial capital, has made Forex a very attractive trade to a lot of people. A forex trading demo is recommended before you start to invest.

Happy investing.

After breaking the psychological level at 1.60 last Tuesday, the eur/usd fell by more than 400 pips. The fact that the Euro did not or could not go beyond 1.60 was more or less expected.

The indicator here is the absence of major option barriers above 1.60. This means that the Euro’s move toward 1.60 was not as strong as its move beyond the realm of 1.50. Come to think of it, the move to 1.60 could even be a near term top.

Photo Credit: Sheldon Pax

On the other hand, the eur/jpy seemed ready for a top, but has since fallen by more than 150 pips and seems to be going down even further.

From the above scenarios, it seems that the US dollar has reached an all time low, but may be recovering soon. But for the euro, this could mean just the start of further losses, and here are three reasons why this is so:

• While waiting for the Federal Reserve interest rate decision, there has been a growing confidence that the Federal Reserve will only cut interest rates by 25bp, but also believe that the Fed will sustain this move throughout the remainder of the year.
• There’s been a change in the FXCM Speculative Sentiment Index. Since 2006, the eur/usd rallied from 1.25 to 1.60. And now, the index has flipped favorably indicating a strong sell signal.
• Currently the eur/usd’s 4th wave correction process is underway; however, support does not begin until the eur/usd has touched 1.4667.

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The week ahead offers traders and investors an array of economic news that highlights the Federal Open Market Committee decision regarding its monetary policy Wednesday afternoon.

The majority is expecting the Federal Open Market Committee to relax its policy by approximately 25 basis points to 2.0%. The Federal Open Market Committee is also expected to maintain its policy for the rest of the year starting after its granting of an aggressive cut-rate, which is hurting the dollar.

The reason for all this is the FOMC’s increasing confidence in the US dollar. This prompted the FOMC to end the cutting back of interest rates and to concentrate instead on the task of curbing the rising inflation.

The dollar made it to an all time high in two weeks against the Japanese yen trading at 104.79 as well as against euro trading at 1.5590.

While it remains to be seen whether the latest rebound of the US dollar will hold out in the long run, officials in the Euro-zone are beginning to become uneasy with the current trend, and are expressing concerns over the dwindling value of the euro.

Photo Credit: Manuel Delgado Tenorio

As the price of crude oil dives under $116 on concerns of dwindling demand, the gold futures fall sharply amidst a stronger dollar

The drop in crude oil prices and a rebounding dollar have sent the gold futures plummeting Tuesday to a four-month low.

Traditionally, gold is viewed by investors as a hedge against high oil prices and inflationary trends; however, things are looking bright for the dollar again with the drop in crude oil together with other commodities such as silver, copper, heating oil and agriculture futures

The reason for the dollar’s surge against other major currencies is due to increased confidence the Federal Reserve end cutting of interest-rate, turning its attention to controlling inflation, to cut benchmark rate Wednesday by a quarter of a point, and then maintain it throughout the year.

Lower interest rates can boost the economy; however, this has the tendency of undermining the dollar, and may encourage investors to go for gold and other hard assets that are know for holding their value.

Photo Credit: kevindooley

Triggered by rising oil prices, fear of inflation has gotten investors running after gold. However, the gold price surge was short-lived after a US dollar rebound.

Said increase in gold was a reaction to a new surge in oil price — just a little bit under $120 — earlier due to rumors that oil supply coming from Nigeria as well as the North Sea might be threatened.

Photo Credit: covilha
Instances or even rumors of threat to oil supply will get investors scampering after gold. This they do in order to neutralize rising inflation.

As an alternative to the US dollar, gold investment has suddenly lost its appeal due to the recent rebound of the US currency.

As the world awaits the decision of the Federal Open Markets Committee on Wednesday analysts expect the US dollar to stabilize further. Last week the dollar has pulled close to four cents back to $1.60 against the euro.

Gold traded higher earlier against the dollar as an exaggerated response to further oil price hike in an attempt to curb inflationary trends. However, as the dollar gained a favorable momentum against gold, investors have more than welcomed the price shift.

As US stock markets begin to stabilize, investors are likely to put their investments back into equities instead of gold.

This year the world watched as the euro made its rapid ascent above most other currencies, particularly the US dollar and the British pound.

This sudden escalation of the euro had actually gone beyond the tolerance threshold of $1.60. The past week, we see the dollar make a comeback that led many analysts to believe that the days of euro’s global dominance may be coming to an end - at least temporarily.

Photo Credit: tunguska
There are two important views behind this theory:

• The Federal Reserve Bank has taken the measure tightening things up and is probably close to the end of this cycle;
• the ECB, on the other hand, has just barely begun.

Forecasts have it that the seemingly invincible or recession-proof Euro-zone economy may very soon succumb to the credit crisis.

Analysts’ forecast would be for the EU to ease up on its monetary policy at a time when the US would be tightening theirs, such that it would serve to fill the void between the interest rate differential of these two economic zones.

This current interest rate gap, analysts believe, is the reason why the US dollar has weakened tremendously.

The Bank of Canada in its attempt to ease its lending policy without having to worry whether or not prices will be affected, has made a move to reduce its lending rate to 3.0 percent — down by 50 basis points.

Due to a mild inflation that’s already being felt in Canada, this move has been foreseen by analysts.

Despite the fact that commodity prices have remained more or less stable, it can be seen that Canada’s economy has slowed down because of the unfolding subprime crisis over the border.

Photo Credit: SqueakyMarmot

The current situation has been compared to the problems faced by the European Central Bank, which chose not to reduce interest rates, afraid that it might bring about inflation.

The Euro, as a result, has soared 8.5 percent above the US dollar, while the Canadian currency took a plunge.

Rumor has it that the BOC might further cut rates in a move that could work in favor of the US dollar, enabling it to regain whatever ground it lost the previous year.

If this will indeed happen, the US dollar is most likely going to make a comeback to C$1.03 before the U.S. Federal Open Market Committee meeting on April 30 begins.

Photo Credit: Hélio Costa

This introduction is meant for people who are just beginning to explore the exciting world of FOREX.

So what is FOREX or FX you might ask? FOREX is an abbreviation for Foreign Exchange. It is a market that deals mainly with exchanging or trading different currencies.

Due to the advancement of communication and the Internet FOREX has become so common and widespread that even you can trade currencies in your own home.

Now don’t confuse FOREX with futures market. In the latter, a contract is drawn-up stating that you’re buying a particular currency at a future price.

FOREX on the other hand, entails a less risky procedure than futures market. It’s a lot more profitable too compared to stocks - and has it been mentioned that it’s also more fun?

So what should you do or where should you go in order for you to have access to the FOREX market?

Unlike the traditional stock market where trading is more often than not “centralized,” trading in currencies is not tied down to any trading floor nor is it centralized like the stock exchange.

Currency trading is more of an interbank or over the counter kind of market, mainly because FOREX is a non-stop, 24-hour, electronically run market.

What does a FOREX trader do? How is he involved in the FOREX market?

The FOREX trader, just like large banks, tries to shield himself from the fluctuations or drastic changes in exchange rates of different currencies.

The FOREX trader actually neither sells nor buys anything, since FOREX is chiefly a speculative endeavor. Therefore you don’t see any actual transfer of currencies, since all of these trades are virtually just computer entries. In this realm, currencies lose their “original value” and are simply floated depending on its current market value and the relative value other currency it is paired with.

If your account is in dollars then your gains as well as losses will also be computed in dollars. The transaction will then be recorded as such on the trader’s account.

In essence FOREX is nothing but a speculative move in order to protect yourself from unfavorable changes in exchange rates of different currencies. A forex trading demo can help you to learn more.