Sterling falls Against Euro & Dollar “Nothing UK-specific” says Currency Strategist

At Gerard Associates Ltd we continue our daily look at factors affecting markets and currencies allowing some insight into conditions affecting exchange rates.

Cash and income timing from a UK Pension or QROPS (Qualifying Recognised Overseas Pension Scheme) should be considered to maximise the Pension, QROPS and investment income taken.

Investment market volatility and currency exchange remains a challenge. The global economics are volatile and unprecedented in history. Currency exchange continues to concern expats with UK Pensions, QROPS and now QNUPS (Qualifying non UK Pension schemes).

Sterling fell against the euro on Friday as anticipation an aid package would be agreedfor Ireland helped strengthen the single currency. The plan will be put in place to help thecountry cope with the current situation of their banking system and we should heardetails of the package this week. Some expects have warned that a rescue may not beenough to prevent contagion in the single currency.

The pound also fell against the dollar after China raised banks’ reserve requirements,denting stocks and riskier currencies as concerns grew that tighter policy would dampenChinese growth.

“There is nothing UK-specific. Sterling had benefited with the euro from the increasedlikelihood of an Ireland bailout package, but we are seeing a little enthusiasm being lostand now the China move is the main driver,” said currency strategist atBNP Paribas.

Against the dollar, sterling was down 0.5% at $ 1.5966, well below a high for theday of $ 1.6095.

Analysts said it could be significant that sterling closed the week below $ 1.60, making itdifficult for the currency to extend a recent rebound from a low of $ 1.5840 reached earlierthis week, its weakest since late October.

“There is some positioning unwinding that is weighing down on sterling,” said FX strategist at Lloyds TSB. “We could see some choppiness heading into theU.S. Thanksgiving week and if a solution to Ireland is put in place next week then wecould see the euro and the pound bounce.”

Against the dollar, technical analysts said sterling was supported around the $ 1.58region, given its 55-day moving average lay around $ 1.5825 on Friday, while the 50% retracement level of the pound’s rally in September-November came in around$ 1.58.

The pound saw some support from Bank of England policymaker Paul Tucker who saidcentral banks must not dilute their commitment to price stability, although this was short-lived with the market’s focus elsewhere.

Sterling has been supported since Wednesday’s minutes from the Bank of England’slatest policy meeting suggested improving economic data and stubbornly high inflationwould keep quantitative easing off the agenda for now, with many investors not expectingto see any suggestion of it for the rest of this year.

It was also helped on Thursday by data showing a recovery in UK retail sales after twomonths of declines, although government borrowing hit another record high.

Gerard Associates Ltd advises expats and people considering living abroad on the technical and currency options available for Pensions, QROPS, QNUPS and investments in a clear format allowing all customers to make an informed choice. Our service encompasses Pension including QROPS and QNUPS and investments in a clear format allowing all customers to make an informed choice.

This with the reassurance and security of UK FSA authorised and regulated advice – essential for your security.

Russel mori writes for Gerard Associates LTD, for more information on QROPS, QROPS Pensions, QROPS List, QROPS providers, QROPS guernsey info available online.

Forex: Bearish U.S. Dollar Sentiment Gathers Pace, Euro Breaks Narrow Range

Talking Points

Japanese Yen: Mixed Amongst Major Currencies
Pound: BOE’s Posen Sees Scope For Further Easing
Euro: ECB Says Rates ‘Appropriate’
U.S. Dollar: Producer Prices, Trade Balance on Tap

 

The U.S. dollar weakened further against its major currency counterparts, with the EUR/USD rallying to a high of 1.4121 on Thursday, and the bearish momentum behind the greenback may carry into the end of the week as investors expect the Fed to expand monetary policy further. As EUR/USD breaks out of the narrow range from earlier this week, we are likely to see the pair continue to retrace the decline from earlier this year, and euro-dollar looks poised to make a run at 1.4440-50, the 78.6% Fibonacci retracement from the 2009 high to the 2010 low, as price action holds steadily above the 61.8% Fib around 1.3890-1.3900. With the 50-Day moving average (1.3158) approaching the 200-Day SMA at 1.3165, the bullish crossover suggests that the exchange rate will continue to push higher throughout the month, but there could be a corrective retracement in the coming days as the recent rally remains overbought. Given the strong bearish sentiment underlying the greenback, we would need the RSI to fall back below 70 to see a pullback in the exchange rate, and the rally may carry into the following week as the index bounces back to 78.

 

Meanwhile, the European Central Bank reiterated that the interest rate is “appropriate” in its monthly report and went onto say that price growth remains contained as the ongoing slack within the economy bears down on inflation. At the same time, ECB board member Yves Mersch said that the recovery in Europe remains in-line with the central bank’s forecast and that the recent slew of soft data “does not warrant increased pessimism” for the region, but went onto say that it remains “too early to claim victory” as the economic outlook remains clouded with uncertainties. As the Governing Council maintains a neutral outlook for future policy, the ECB may look to reestablish its exit strategy going into 2011, which would instill a bullish outlook for the single-currency in the beginning of the following year as the Fed maintains a dovish stance.

 

The British pound rallied to a fresh monthly high of 1.6066 during the overnight, and the exchange rate is likely to push higher going into the end of the week as carves out a short-term bottom around 1.5700, the 38.2% Fibonacci retracement from the 2009 low to high. As a result, the GBP/USD looks poised to test the 23.6% Fib around 1.6230-40, and the pair may continue to retrace the decline from the beginning of this year as the rally gathers pace. Meanwhile, Bank of England board member Adam Posen said that the global economy needs increased monetary stimulus according to an article in the Handelsblatt newspaper, and Mr. Posen may push to expand policy further in the coming months given the substantial amount of slack within the real economy. As a result, the British Pound is likely to face increased volatility over the following week as the BoE is scheduled to release its policy meeting minutes on Wednesday, and a three-way split within the MPC could spark a sharp selloff in the GBP/USD as market participants see scope for the BoE to expand quantitative easing further over the coming months.

 

The greenback weakened against all of its major counterparts, with the USD/JPY tumbling to a fresh yearly low of 80.88, but the dollar is likely to face increased volatility going into the end of the week as the economic docket is expected to reinforce a mixed outlook for future growth. Producer prices in the world’s largest economy is forecasted to increase at an annualized pace of 3.7% in September after rising 3.1% in the previous month, while the trade deficit is expected to widen to -$ 44.0B in August from -$ 42..8B in the month prior. However, market participants may turn a blind eye to the economic developments as they look towards the Fed’s interest rate decision on November 3, and comments from the central bank are likely to play an increased role in dictating price action as investors weigh the prospects for future policy.

DailyFX provides forex news on the economic reports and political events that influence the currency market.
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Euro Exchange Rate Graph 2010 – The Exchange Rate Of The US Dollar Expresses Its Performance

Euro Exchange Rate Graph 2010

The exchange rate of the U.S. Dollar, as seen on a US Dollar exchange rate history chart, expresses the dollar’s performance relative to the currency with which it has been paired for a specific comparison. How the U.S. Dollar has fared against the British Pound, for example, may not indicate its performance against the Swiss Franc or Japanese Yen.

As the most traded currency in the world, the dollar (U.S.) is a part of every major trade made in FOREX, or the foreign exchange market. Its coupling with the Euro Dollar is, in fact, the most common trade on the board. An investor making this bet is either buying the Euro (EUR) and selling the US Dollar (USD) in a long position or selling the Euro and buying the USD if he is going short.

When 730 delegates from the forty-three nations allied with the U.S. during WWII met in a New Hampshire hotel in July of 1944, history was made. At this meeting of the United Nations Monetary & Financial Conference, several things were accomplished, including formation of the International Monetary System (IMF) and implementation of the Bretton Woods System of monetary policy. Euro Exchange Rate Graph 2010

A glimpse at a US Dollar exchange rate history chart for this time reveals the strength of the dollar as compared to other international currencies. The war, however, was very expensive to wage and things needed to be settled regarding international financial policy. Member nations agreed at this time to implement monetary policies in their respective countries that would ensure the exchange rates of their currencies were kept within certain boundaries and in accordance with the value of gold.

When the U.S. elected to go off the gold standard in 1971 during Richard Nixon’s presidency, this changed everything. With the dollar no longer tied to the price of gold, which was a unilateral decision on the part of the United States, this freed them up to print whatever amount of money they chose.

This action consequently caused world currencies to ‘float’, with their values figured on a new, speculative basis rather than being backed by something tangible like gold. Currency exchange rates now change constantly, often buffeted about by political news and market sentiment. Speculators now rule the financial markets.

All major trades in FOREX include the U. S. Dollar being traded against another major currency. These include The Swiss Franc, the British Pound and the Euro, Canadian and Australian Dollars. If a US Dollar exchange rate history chart is to provide a true representation of actual dollar strength or weakness, it should show the relationship of the USD against all of these other major currencies simultaneously. Euro Exchange Rate Graph 2010

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Forex: U.S. Dollar Mix On Thin Trading, Euro Holds Tight Range

Talking Points

Japanese Yen: Mixed Against Majors
Pound: U.K. Banks Raise Borrowing Costs
Euro: Holds Narrow Range For Third Day
U.S. Dollar: ECB Trichet, Fed’s Yellen on Tap

 

The Euro fell back from a high of 1.4006 during the overnight trade to maintain the narrow range from the end of the previous week, and the exchange rate may hold steady throughout the day as the economic docket remains fairly light for Monday. The EUR/USD was unphased by the comments from the European Central Bank as price action held within a 90pip range, but the speech by central bank President Jean-Claude Trichet scheduled for 16:00 GMT could spark increased volatility in the exchange rate as investors weigh the outlook for future policy. ECB board member Guy Quaden said the Governing Council may decide to normalize monetary policy further in the first quarter of 2011 as he expects the region to grow at a “slower, more moderate pace,” and went onto say that current policy remains “appropriate” during an interview with Bloomberg News.

 

At the same time, Governing Council member Lorenzo Bini Smaghi held a hawkish tone during an interview with Market News International and said “some inflationary pressures” are becoming apparent, led by higher energy costs, and the central bank may look to reestablish its exit strategy going into the following year as they maintain their one and only mandate to ensure price stability. ECB President Trichet may talk up the likelihood for a rate hike in the beginning of 2011 as the outlook for growth and inflation improves, and hawkish comments from the central bank head could drive the EUR/USD higher going into the end of the year as market participants speculate the Federal Reserve to increase quantitative easing at its next rate decision in November. However, as the recent rally in the euro-dollar remains overbought, with the daily relative strength index holding at 77, a corrective retracement may unfold in the days ahead, which could lead the pair to test 1.3500, the 50.0% Fibonacci retracement from the 2009 high to the 2010 low, for near-term support.

 

The British Pound bounced back from a low of 1.5913 during the European trade, with price action holding above the 10-Day moving average at 1.5850, and the GBP/USD may continue to trend higher over the near-term as it maintains the rally carried over from the previous month. As a result, the pound-dollar may make another run at 1.6000 later today as it retraces the overnight decline, but a shift in market sentiment could push the exchange rate lower as the U.S. dollar appears to be regaining its footing against its major counterparts. Meanwhile, a report by the Bank of England showed commercial lenders in the U.K. raised the cost of two-year fixed mortgage rates with a 25% deposit in September to 3.79% from 3.74% in the previous month, and the central bank is likely to maintain a dovish outlook for future policy as household and businesses continue to face tightening credit conditions. The BoE minutes due out later this month is likely to show the majority of the MPC vote to maintain its current policy in October, but a three-way split within the central bank could trigger a selloff in the British Pound as investors speculate the board to expand QE in the coming months.

 

U.S. dollar price action was slightly mixed overnight, with the USD/JPY slipping to a low of 81.71, and the greenback could face choppy price action throughout Monday’s trade as the U.S. bond market remains closed in observance for Columbus Day. With no scheduled event risks, risk trends are likely to dictate price action as the equities market are set to open their doors, but here could be a shift in market sentiment as members of the Fed are scheduled to speak throughout the day.

DailyFX provides forex news on the economic reports and political events that influence the currency market.
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Forex: Euro Under Pressure, U.S. Dollar Benefits From Safe-Haven Flows

Talking Points

Japanese Yen: Slightly Mixed Across the Board
Pound: U.K. Construction Expands At Faster Pace
Euro: Investor Confidence Improves Further
U.S. Dollar: Pending Home Sales, Fed Chairman Bernanke on Tap

As EUR/USD price action holds below the 61.8% Fibonacci retracement from the 2009 high to the 2010 low around 1.3880-90, a corrective retracement could unfold in the days ahead as the rally from the September remains overbought, and the daily relative strength index should fall back below 70 this week if we see the exchange rate work its way back towards the 50.0% Fib around 1.3500. The euro-dollar showed little reaction to the Sentix survey even though the report showed investor confidence increased to a three-year high of 8.8 in October from 7.6 in the previous month, and shift in market sentiment could drive the exchange rate lower throughout the day as risk trends continue to dictate price action in the currency market. However, if the euro-dollar is able to find short-term support around the 50.0% Fib, there could be a phase of consolidation over the coming weeks given the uncertainties surrounding the economic outlook, and the EUR/USD may trend sideways before we see another breakout in the exchange rate.

Meanwhile, Ireland’s central bank lowered its growth forecast for the region and expects GDP to expand 0.2% this year amid an initial forecast for a 0.8% rise, while the growth rate is anticipated to increase 2.4% next year versus earlier projections for a 2.8% expansion. The central bank went onto say that the recovery in Europe remains “uneven” as the rebound in economic activity appears to be tapering off in the second-half of the year, and went onto say that the outlook remains clouded by high uncertainties as the governments operating under the single-currency struggles to manage their public finances. In addition, the economic docket showed producer prices in the Euro-Zone increased at an annual pace of 3.6% in August after expanding 4.0% in the previous month, and the slower pace of inflation paired with the slowing recovery could lead the Governing Council to maintain a dovish policy stance going into 2011 as it aims to balance the risks for the region.

The British Pound bounced back from a low of 1.5748 during the European trade as U.K. policy makers held an improved outlook for the region, but the GBP/USD is likely to trade within the narrow range carried over from the previous week as price action struggles to hold above 1.5900. Chancellor of the Exchequer George Osborne said the economy has “moved out of the danger zone” during an interview with BBC Radio, while former Bank of England Deputy Governor John Gieve talked down speculation for a further expansion in quantitative easing and said interest rates will have to rise going forward according to an article in the Guardian newspaper. As investors mull over the outlook for future policy, the GBP/USD is likely to hold steady ahead of the BoE interest rate decision later this week, but the central bank may refrain for releasing a policy statement like we’ve seen for the past few months.

The greenback bounced back against most of its major counterparts, with the USD/JPY rallying to a high of 83.86 overnight, but the dollar is likely to face increased volatility later today as the economic docket is expected to reinforce a mixed outlook for the world’s largest economy. Pending home sales in the U.S. is forecasted to increase 0.9% in August following the record 20.1% drop in the previous month, while factory orders are projected to fall 0.4% during the same period after tipping 0.1% in July. In addition, Fed Chairman Bernanke is scheduled to speak regarding the economy later today, and comments from the central bank head could shake up the majors as investors weigh the prospects for future policy.

DailyFX provides forex news on the economic reports and political events that influence the currency market.
Learn currency trading with a free practice account and charts from FXCM.

Dollar Euro Exchange Rate Graph – How to Fix (or Lock Into) A Foreign Exchange Rate

Dollar Euro Exchange Rate Graph

If you’ve ever had to exchange foreign currency you will know the frustration of not being able to accurately calculate how much of one currency you will need to give in order to obtain a set amount of another at some point in the future, due to fluctuations in the exchange rate. Dollar Euro Exchange Rate Graph

We certainly used to have this problem, but then discovered a way in which is possible to lock in at the present rate or even better, and at an exchange rate better than we would have ever obtained from our bank.

Choose your own currency exchange rates – using Limit & Stop orders

Let’s say you want to sell US dollars to buy 2,000 Euros sometime within the next month.

While the present eur to usd buy rate of say USD/EUR 0.70 is acceptable to you, let’s say that based on your reading of commentary about the Euro exchange rate against the US dollar, or your reading of the charts you believe that it’s likely the US dollar may strengthen against the Euro in the coming week, and you decide you would be happy to transact at USD/EUR 0.73

So, right now you will need USD $ 2,857 to buy 2,000 Euro at USD/EUR 0.70

If the euro rate moves in your favour you can reduce it down to $ 2,739 to buy the same 2,000 Euros at USD/EUR 0.73.
This would save you $ 118 ! Every little helps, and it might as well be in your pocket.

Ideally you want to get a better euro rate, so all you need to do is go to your dealer’s website (details later) and set a LIMIT order at your target rate of 0.73. Just in case your assessment is wrong you also set a STOP order at 0.69, which is the worst rate at which you are willing to transact.

So, you’ve decided the most you want to pay is USD $ 2,898 to buy the 2,000 Euros at the USD/EUR 0.69 worst case rate

You place your order, and now if your dealer’s euro buy rate hits 0.73 between now and the expiry date you have set (e.g. for the rest of today or maybe 1 month into the future, depending on your requirements) your transaction will be executed at 0.73. Likewise, if during that time price fails to hit 0.73 but slides back to 0.69 your transaction will be done at 0.69.

Of course your decision from the outset might have been that if price never hits 0.73 you don’t want to transact at all, in which case just set the limit order and don’t bother with a stop order.

The currencies section of the website listed at the foot of this article shows you exactly how to do this transaction. Dollar Euro Exchange Rate Graph

Book a fixed currency exchange rate now for the future – using Forward Contracts

If however you need to be certain of the exact rate you will get in the future, you may prefer to use a forward contract.

Let’s say that you are in New Zealand and have done business with someone in the US and agreed a price with them today in US dollars of let’s say $ 20,000, which seemed acceptable to you based on today’s currency exchange rate of NZD/USD 0.68

Your supplier’s terms are one month, so you know that one month from now you will have to pay the agreed US dollar amount.

You obviously don’t want to buy the US dollars now and have all your cash tied up waiting a whole month for the invoice to come in, but at the same time you are worried that between now and next month the US dollar might really strengthen against the New Zealand dollar.

Right now the USD $ 20,000 would cost you NZD $ 29,412 which is acceptable to you.

But if the US dollar strengthened and the rate changed to NZD/USD 0.61 by next month you would have to find NZD $ 32,787.

That might not be acceptable to you! In fact it might even wipe out your profit margin.

So, what if you could lock the currency exchange rates you saw today when you agreed the US dollar price ? Many dealers offer the facility of buying a Forward Contract. This enables you to see a rate today which you can book now for a transaction you want to conduct at a future date. Hence the foreign exchange risk is completely removed from your transaction and you can sleep easy at night.

Most dealers’ websites are available 24 hours a day when the forex markets are open, ensuring that you can lock in your rate exactly when you want it.

We’ve found the above services invaluable and have saved us a lot of money.

Extra spending money for the holidays

Even if you’re not transacting large sums, these tools can still save you money. For example we like to holiday in Europe each year and so need to buy some euro currency at some point during the year. As well as our every day bank accounts we’ve also opened an account with our bank denominated in Euros. (Any major bank will let you open a foreign currency account).

We know how much spending money we want to bring with us, so we just target a currency exchange rate we would be really happy with and place an order up to 6 months before we’re going to go over there.

Sometimes the rate (limit order rate) is hit earlier than we expect and the Euros land in our account months before we go on holiday, earning us a little extra interest too, but if this doesn’t happen then we just take the rate that’s available a few days before we go on holiday. All in all not a bad way of earning a little extra spending money for the holidays! Dollar Euro Exchange Rate Graph

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Forex Euro Dollar Forex Robot – How The Settings On The Robot Increase Profits

Did you know that the largest financial market even larger than the New York Stock Exchange which trades at $ 20 billion is the foreign exchange markets? At the rate of $ 3 trillion a day! Wow! And just to think that you could be part of that with just a small investment makes you feel as if you have won the lottery. It is all within your grasp!

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Forex robots are big business online but it’s not the trader who makes money it’s the vendor. It’s a wonder that traders actually believe they will make money with them as most have a fatal flaw which is enclosed in this article.

How many times have you stared at your computer monitor in despair after making a loss in the forex market? Have there been occasions when you paced up and down uncertain as to whether you should lunge forward and make the trade or hold your money back?

Many guys are just finding the magical power of Forex Megadroid in Foreign currency trade. ‘Had this soft ware existed way back in my rookie days then I would have been a rich guy by now’ says somebody in the forex business. Well! Better late than never! Buy the Forex robot Forex Megadroid now and start multiplying your money in the forex trade. It is slated to multiply your dollars by four fold and not long before you will be a millionaire!

Some owners of Forex Robots declare that their software system programs can give you big profits instantly. And some manufacturers of these currency trading Robots often say that their system software can work automatically and is reliable to do the Forex Trading for you.

There are real and fake forex products out there. Don’t be afraid forex is a profitable industry that is highly profitable but be careful who you work with. Find out more now.

When looking at legitimate Forex trading software programs online many people fall victim to clever little tricks and methods employed by the Forex Robot owners to inflate or distort the program’s effectiveness. One such trick is by displaying the ‘back test’ results. The back test results represent the results of the software running in demo mode and although they can give a decent representation of how well the Forex Robot can perform they also can be altered to fit the bill.

Hypo Venture Capital Headlines:Euro Weakens Versus Dollar on Sovereign-Debt Concern; Kiwi Touches Record

The euro fell for the first time in three days against the dollar on concern the currency region will struggle to contain its sovereign-debt crisis.

The currency slid versus most of its major counterparts after Greece’s Prime Minister George Papandreou said last week in Athens that he will press ahead with additional austerity measures after failing to win backing from opposition parties. New Zealand’s dollar dropped after surging today to its highest level since exchange-rate controls ended in 1985 as the nation’s trade surplus widened to a record in April.

“Until we get resolution, some clarity on what’s going on, the market is not going to have the confidence to take the euro higher,” said David Watt, senior currency strategist at Royal Bank of Canada’s RBC Capital Markets unit in Toronto.

The euro depreciated 0.3 percent to $ 1.4282 at 5:06 p.m. in New York, from $ 1.4319 on May 27. The shared currency traded at 115.60 yen, compared with 115.67. The dollar was at 80.94 yen, compared with 80.80, after touching 80.70 on May 27, the lowest level since May 16. The pound fell 0.2 percent to $ 1.6475.

Markets were closed today in the U.S. for the Memorial Day holiday and in the U.K. for the Spring Bank Holiday.

The euro declined after Greece’s Antonis Samaras, leader of the biggest opposition party, New Democracy, rejected last week Papandreou’s plan for austerity measures, saying his party wouldn’t be blackmailed.

Call for Consensus

European Union officials have called for consensus on the package, which includes an extra 6 billion euros ($ 8.6 billion) of budget cuts and a plan to speed 50 billion euros of state- asset sales.

France’s consumer spending decreased 0.3 percent in April after a 0.7 percent drop in the previous month, according to the median forecast of 16 economists in a Bloomberg News survey. The report from the national statistics agency is due tomorrow.

The euro has fallen 2.1 percent in the past month for the worst performance of 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Currency Indexes. The Swiss franc has strengthened 3.6 percent, and the yen has added 2.3 percent.

New Zealand’s dollar slid 0.4 percent to 81.63 U.S. cents after touching 82.19, the highest since the end of exchange-rate controls more than 25 years ago.

Exports outpaced imports by NZ$ 1.11 billion ($ 910 million) in April, compared with a revised NZ$ 578 million surplus in the prior month. The median forecast in a Bloomberg News survey of economists was for a NZ$ 600 million surplus.

Kiwi’s Resilience

“Resilience of the kiwi has been very impressive,” said Mitul Kotecha, head of global foreign-exchange strategy at Credit Agricole SA in Hong Kong. “The figures today from New Zealand are obviously helping out as the trade data was far stronger than the market had expected.”

IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, was little changed before reports this week forecast to show employers hired fewer workers in May and manufacturing cooled this month.

“The data has, on the whole, disappointed,” said Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington, New Zealand. “The market will just continue to push further out expectations for Federal Reserve tightening. The dollar will probably continue to weaken.”

A projected 185,000 gain in payrolls in May will follow a 244,000 April increase, according to the median forecast of 68 economists in a Bloomberg News survey before the June 3 report from the Labor Department.

The Institute for Supply Management’s manufacturing index fell to 57.6 this month, the lowest level since October, according to the median forecast before a report June 1. Readings above 50 signal expansion.

Interest-rate futures show an 11 percent chance the Fed will raise its target rate for overnight lending between banks by December, down from 22 percent odds a month earlier. The central bank has held its benchmark at zero to 0.25 percent since December 2008.

Hypo Venture Capital Zurich Financial News and latest headlines – Hypo Venture Capital Zurich, Switzerland is an independent investment advisory firm which focuses on global equities and options markets. Our analytical tools, screening techniques, rigorous research methods and committed staff provide solid information to help our clients make the best possible investment decisions. All views, comments, statements and opinions are of the authors. For more information go to www.hypovc.com.

Euro Exchange Rate Trend Against The U.s. Dollar

One of the pillars of the status of the United States as a global super power is its currency, the U.S. dollar, which served as a major international reserve currency in the decades following the World War 2. Recently, the U.S. dollar faces increasing pressure from a newborn currency; namely, the common European currency, the euro, which is evolving into a new major reserve currency and this situation affects the euro currency rate against the dollar.

In the first couple of years, following its introduction, the euro remained weaker than the U.S. dollar but in the next few years the Forex traders witnessed a stable upward trend and the euro currency rate against the American currency gradually increased.
The euro and the U.S. dollar represent a major currency pair, which is among the most traded on the Forex markets and the euro exchange rate is crucial not only for currency trades but for all governments in the Eurozone and the countries whose national currencies are pegged to the euro. The euro exchange rate vs. the dollar also serves as a major indicator to compare the economic development of the European Union and the United States, respectively.

In general, the governments have one major tool to influence the exchange rate of the euro against the dollar; namely, the interest rates. It is a powerful weapon in the hands of the central banks although the Federal Reserve and the European Central Bank (ECB) use it with caution. The ECB prefers not to interfere directly in the Forex markets and tries to influence the euro exchange rate utilising different means the central bank governors possess.

The euro exchange rate is also very sensitive to data about the Eurozone and the economic development of the participating countries. In May 2010, the euro hit a 14-month low against the U.S. dollar on news that Greece experience serious financial troubles and rumours that the financial aid for the country can hamper the financial stability of the Eurozone.

Another property of the euro exchange rate against the dollar is its volatility, which could reach up to 4 per cent in a single trading day. The biggest daily gain of the euro vs. the dollar was on March 18, 2009 when the common European currency jumped by 3.9 per cent against the dollar, according to Reuters data.

Historically, there were many gains and slumps of the euro currency rate vs. the dollar but most analysts agree that the common European currency will continue to be relatively strong against the dollar in short- and mid-term. However, the Forex market is a sophisticated one, characterised by extreme volatility, so any forecasts can prove untrue in a few minutes. That is why all Forex experts and economists around the globe watch closely the exchange rate of this famous currency pair.

Dr Timothy Ross is an expert on the financial markets. Recommendation: If you need to make a large or regular euro payment consider the help of a euro exchange rate specialist as an alternative to your bank.

Forex Euro Dollar Rate – How To Calculate Profits In A Forex Trade

Forex Euro Dollar Rate

Unlike the stock, futures, or options markets, calculating profits in the foreign exchange market can be a bit more complex. This is because you have to transfer profits from the foreign currency you purchased back into your home currency.

This concept is best understood through an example. So, let’s say you have 10,000 US dollars, and let’s say the EURUSD is trading at 1.5000. This means that 1 euro buys you 1.5000 US dollars — or, conversely, one US dollar buys you 0.667 euros (1 / 1.5 = 0.666). So, with your 10,000 US dollars, you are able to buy about 6,666.66 euros.

Now, let’s say the EURUSD exchange rate jumps up to 1.5500 — meaning that one euro can now buy you 1.5500 US dollars. Since the euro rose in value since you made your purchase, you can now sell your euros for more dollars than you initially purchased them with. In other words, you made a profit!

To realize your profit, all you need to do is convert the 6,666.66 euros you now have back into US dollars. Since one euro now buys you 1.5500 US dollars, you can simply multiple your quantity of euros — 6,670 — by the exchange rate (1.5500). The result is 10,333.33. So there you have it — a profit of 333.33 US dollars! Forex Euro Dollar Rate

Profiting By Selling a Currency (aka “Going Short”)

Slightly more involved are transactions in which you go short — in other words, in which you believe the exchange rate is going to fall. In such a scenario, what you are actually doing is borrowing the currency you believe is going to fall in value. So, let’s say you borrow the equivalent of 10,000 US dollars when the EURUSD is trading at 1.5000. This means you have borrowed about 6,666.66 euros, and have used those borrowed funds to purchase 10,000 US dollars.

Now, let’s assume the exchange rate falls to 1.4500, and you decide you want to exit the trade. To do this, you simply want to exchange the 10,000 US dollars you purchased back into euros at the new exchange rate. At a rate of 1.4500, your 10,000 US dollars buys you 6,896.55 euros. You now have to repay the original 6,666.66 euros you borrowed, leaving you with 229.89 euros. You then want to convert this back into US dollars — your home currency — which, at an exchange rate of 1.4500, amounts to 333.33. This is your profit from the trade.

As you can see, foreign exchange trades can be a bit more complex than your typical stocks or futures trade — but if you take it step by step, you’ll see it’s really just a few straightforward math equations. Forex Euro Dollar Rate

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