The recent rally in the Euro is very surprising given the lack of any positive or even specific Euro related news over the past couple of days.

Sentiment in the forex CFDs market about the single currency remains low because a Greek default is looming ever larger and European policy makers are still arguing over the rules that they hope will make the Eurozone stronger moving forward.

In fact short positions hit record highs over the past couple of weeks, which suggests the recent rally is more about shorts covering their positions, leading to the price of the Euro rising forcing other shorts to cover, commonly known as a short squeeze.

If, as is likely, this explains the recent up-tick in the Euro we can expect Euro selling to resume once the squeeze runs out of steam.

Data for the Eurozone for the rest of the week is extremely light, with the ECB monthly report showing how much the ECB is lending to stricken banks due Thursday along with French and Spanish bond auctions.

Both auctions will be closely watched in light of the S&P downgrades on Friday.

Sterling has been fairly steady in the early part of the week, but that might change this morning with jobless claims for December due at 9.30.

The consensus is for a 7K rise but there is scope for a larger number because of the deteriorating economic picture and so a bigger movement in the pound when the data is released.

UK Retail sales are the only release of note for the rest of the week but worth noting because they report over key Christmas period for the retailers. Moreover, they will probably give a good idea to the CFD trading market if the UK economy is heading for (or is already in) another recession.

The US bank holiday on Monday has meant the USD has also been fairly quiet so far this week, but Thursday and Friday sees a large amount of US data including the CPI figure. Hopefully this should give the market an end of week shot of much needed direction in an otherwise rudderless few days.

 
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After CFDs online markets closed last night, Standard and Poor’s the rating agency dealt a severe blow to the European bailout fund by downgrading its AAA status to AA+.

The agency blamed the large number of guarantors that had lost their triple A crown and therefore the funds itself could not maintain the gold standard rating.

Following the announcement, EU officials attempted to reassure CFD trading markets that the funds will not change is ambitions to lend billions of Euros to struggling Eurozone states.

“The downgrade to AA+ by only one credit agency will not reduce EFSF’s lending capacity of €440bn” said the EFSF chief Klaus Regling.

This latest downgrade will increase pressure on Eurozone officials and German government to boost their contribution to the European Stability Mechanism (ESM) which becomes active in July.

Interestingly the Euro has rallied so far following the announcement and currently sits at 1.2021 against Sterling and up against the Greenback at 1.2790.

This morning in the UK we had the latest CPI reading which indicated a 4.2% year on year according to the Office for National Statistics.

This is further fall following last months 4.8% figure and eases inflationary pressure on the Bank of England as it creeps lower towards the 2% target level.

This is the biggest year on year decline since April 2009, which was attributed to discounts on petrol gas and clothing according to the ONS.

The US re-opens today following its Bank Holiday for Martin Luther King day yesterday. They start their week with Empire manufacturing data which assesses business conditions and expectations of manufacturing executives specifically in New York.

This is followed by a Canadian Interest rate decision where we are expecting them to maintain interest rates at 1.0%.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

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A new shockwave filtered through the CFD trading markets on Friday as the credit agency, Standard & Poor’s, downgraded France, stripping the European powerhouse of its prized AAA rating.

The decision to remove this vital asset in keeping borrowing costs to a minimum left France with a AA+ rating, a judgment that will likely cost billions in higher repayment costs.

S&P said “Europe’s austerity and budget discipline alone were not sufficient to fight the debt crisis and may become self-defeating”.

Alongside France, S&P cut the rating of Italy, Spain, Cyprus, Portugal, Austria, Slovakia, Slovenia and Malta, though it was expected that these countries would have their ratings lowered.

Overall, the picture isn’t looking good for Europe and, with further downgrades likely over the next few months, it will be important to see how the ECB reacts in keeping this ongoing debt crisis under control.

The main winner on the forex CFDs market continues to be the US Dollar with further gains against most currencies likely as investors pile more money into the global reserve currency.

For as long as the US currency keeps this status, it will remain the market leader in these testing times as Europe sits on a knife edge between growth and recession.

There is very little data out today, with the only comment of note coming from a speech by ECB President Mario Draghi due at 6pm UK Time.

It is likely he will focus on the downgrade of France and how the ECB will look to repair the damage it has caused.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

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The CFDs online markets continue to be driven almost exclusively by extreme changes in sentiment on a day to day basis. The recent Euro rally stems from the positive outcome of Spanish and Italian bond auctions yesterday.

Both countries were able to place the bonds at considerably lower rates than in recent auctions, lifting sentiment and the Euro – Dollar forex pair throughout yesterday and into this mornings trading.

Worryingly data just out showed Spanish banks borrowing almost €140bn from the ECB in December, almost the record high set back in July 2011 and this tugged sentiment back in the negative direction.

Both central bank decisions were tame affairs, neither the ECB nor BoE changed rates or announced any change to existing QE programs.

For the Bank of England it seems to be a very much wait and see approach before they announce further asset purchases.

Mario Draghi and the ECB can be pleased with the results so far from the LTRO in December.

Confidence seems to be improving in the European banking system because investors now feel the ECB stands behind the banks, and this is translating into lower yields for European Government debt.

The positive US data flow of recent weeks came to a halt yesterday afternoon, with retails sales figures lower than estimates.

This afternoon’s confidence survey will be very interesting to watch to gauge the state of the consumer given such weak retail sale figures and increasing jobless claims this week.

Looking towards next week there is a huge amount of Chinese data to digest first thing Monday.

Positive Chinese data is generally seen as bullish for the world economy, and hence US negative, so the release will probably set the tone for sentiment for the early part on the week.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

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Europe will remain under the spot light over the next couple of days with the European Central Bank (ECB) meeting today, alongside debt auctions in Spain and Italy.

The speculative market is predominantly short EUR while policy makers, specifically German Chancellor Merkel and French President Sarkozy are making the right noises.

It appears the penny has dropped for Eurozone officials that it is not only about austerity but also about growth and reform.

Reports that Fitch ratings are unlikely to downgrade France’s ratings this year has provided a welcome boost to Eurozone confidence.

However Greece could yet spoil the party given the continuing dialogue with the Troika to decide the second bailout package for the country. Political resistance within Greece suggests that more austerity may not be easy to execute. For the time being there are ongoing questions about the degree of write-downs that Greek debt will endure.

In spite of these issues it looks like CFD trading investors are becoming more immune to events in the Eurozone. While we still have high bond yields for Italy and other euro sovereigns it seems that risk appetite has improved.

One feature that is providing support to sentiment is the positive news out of the US. Even though the Q4 earnings season has not started particularly well, data releases look rather more positive.

Last week’s US December jobs report continued to filter through positives to the market and we have also seen a pick up in small business confidence and a rise in consumer credit.

These recent improvements in economic data snaps highlight the gradual recovery process underway in the US and the growing divergence with the Eurozone economy. This supports the view of the USD out performing the EUR in the short to medium term.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

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The volatility that ended 2011 has yet to return to the markets with Sterling, Euro and the US Dollar all remaining relatively stable against each other.

This may start to change with tomorrow’s central bank interest rates announcements.

Both the Bank of England and European Central Bank are expected to keep rates unchanged at 0.5% and 1% respectively, but the press conference with the newly appointed chief of the ECB, Mario Draghi will be closely monitored.

Any comments about the economic conditions and the ongoing debt crisis in the Eurozone will have a large impact on where the CFDs markets move next so no pressure Mr Draghi!

More pressure was piled on the sovereign debt predicament as a number of European countries continue to be on many of the credit agencies “negative watch”.

Fitch announced that it is likely to slash Italy’s credit rating at the end of January, which will make it even harder and more costly for the struggling nation to borrow funds.

Spain, Belgium, Ireland, Slovenia and Cyprus are also on the list as the credit agencies remain eagle-eyed on how conditions change.

With much of the focus on Europe and its single currency, expect the US Dollar and commodity currencies like the Canadian, Australian and New Zealand Dollars to remain strong as investors look for safer havens to keep their money during these worrying times.

Further euro weakness could also be on the cards if negative comments are realised on Thursday.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

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The British economy is expected to stagnate in the first half of the year according to the British Chamber of Commerce (BCC), with at least one quarter of negative growth expected.

A technical recession, two consecutive quarters of negative growth is still a distinct possibility and the BCC warn the UK economy is still in a precarious position.

The government needs to make important decisions and actually act on them to maintain confidence and investment levels, which as promised in the Chancellors autumn statement included improving the flow of credit to businesses and infrastructure projects.

Although we are about to see another high speed rail line announced today, the BCC warning is timely, and will hopefully persuade the government that expansionary austerity is not delivering the results that the OBR and Chancellor were hoping for.

The Bank of England has long been suggesting monetary policy cannot be the only tool to lift the economy back towards levels of activity seen before the financial crisis, and will be firmly behind the BCC’s suggestions.

In the MPC meeting on Wednesday and Thursday the main discussion will be whether to expand the QE program. Further stimulus is probably on the cards, the only question will be when the Bank acts.

Such actions will apply pressure on GBP/USD as the dollar is being boosted from a decent data flow in recent weeks.

With the ECB unlikely to drop interest rates again, the main focus on a busy Thursday will be the exact phrases new ECB chief Mario Draghi uses in his press conference.

The strange relationship between the CFD trading markets and the head of a central bank means every word uttered is scrutinised in microscopic detail to try to second guess the central banks next move.

Special attention will be given to Mr Draghi when he talks about the ECB plans for bond buying in the secondary market and/or any plans for large scale money creation which it is under pressure to commence but has not yet done so because of intense German opposition.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

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Friday afternoon saw the US economy post 200,000 new jobs in December, making that the sixth consecutive positive month according to official figures.

This came much higher than the anticipated 150,000 jobs and reduces the overall unemployment rate down from 8.7% to 8.5%.

The main areas of job growth were seen in retail, manufacturing, transportation and warehousing and healthcare.

The news did not help the Euro’s cause as it continued its decline against the Greenback falling below under 1.27 for the first time since autumn 2010.

US CFD trading markets also struggled with the Dow Jones and S&P 500 index CFD trading markets both closing lower as they remain concerned over the Eurozone debt crisis.

The report did however provide some political collateral for the Obama Administration during an election year and said the US economy was “moving in the right direction”.

Over to Europe and Mario Monti the Italian PM has asked for all his European counterparts for their full support in implementing austerity measures to stabilise the Euro.

“Europe needs to put into action common and coordinated growth policies on financial stability”. His comments came ahead of the Franco-German summit today in which Sarkozy and Merkel will attempt to strike out a unified position in the Eurozone.

One will look to this summit to provide impetus on Euro trading in the early part of this week. Sterling currently down slightly on last week at 1.2084 and EUR/USD is trading at 1.2771.

As for the rest of the week it is relatively quiet during the early part in terms of headline data. However Wednesday we have real German GDP expected to show a 3% growth for 2011.

Thursday we have both UK and European interest rate decisions both expected to maintain interest rates at 0.5% and 1% respectively, with no change to the overall QE number in the UK.

A busy end to the week in the US, with all eyes on important December US Retail Sales number. Will we see a continuing uptrend on this latest US number? Early signs are that it’s a similar story to UK with retailers posting slightly disappointing numbers.

Finally Friday afternoon we will look at the US Michigan confidence where we will get a latest insight into the consumer confidence regarding personal finances, business conditions and purchasing power.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

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European index CFD trading markets look set to finish the week on a downbeat note, despite some better than expected US employment data for December.

An initial move higher towards the highs of the week proved rather short-lived given the weak backdrop in Europe and the disappointing Eurozone and German data seen earlier this morning.

The Italian market has continued to suffer with Unicredit once more under the cosh slipping even lower, and pressuring financials across Europe.

The FTSE 100 CFDs market looks as if it could be the European out performer finishing the week on a positive note, while the DAX, FTSEMib and CAC40 look to finish the day lower.

The biggest fallers in the UK market include fund managers Man Group and Ashmore after Credit Suisse cut Ashmore to “neutral” while Man suffered on the basis of a price downgrade.

Interdealer broker ICAP is also down in the basement, while on the upside Vodafone is higher after being upgraded to “buy” by Goldman Sachs with a price target of 245p.

Terrestrial broadcaster ITV is also doing well after being upgraded to “overweight” by Morgan Stanley, while satellite broadcaster BSkyB felt the effects of a downgrade by the same broker.

US markets opened slightly lower despite a positive December payrolls report. The numbers came in at 200k, above expectations of 155k, while the unemployment rate dropped to 8.5%.

However, upside has been tempered by the fact that even though the numbers are above expectations, they aren’t enough to suggest a sustained recovery in the US economy, and they also make further QE less likely in the near term.

With Q4 earnings season starting in earnest next week with Alcoa due to report on Monday, investors appear to be holding fire until there is a clearer understanding about the direction of company profit margins and events in Europe.

The pound has been amongst the bigger fallers on the day but this decline has to be set in the context of a very positive week overall. It is still currently close to its highest levels in 10 months against a basket of currencies.

It also hit 15 month highs against the beleaguered euro which again has been hit hard across the board today on the back of an awful German factory orders number, and poor Eurozone retail sales numbers for November.

Eurozone retail sales slumped 0.8%, double market expectations, while factory orders slid 4.8% also well outside expectations of a 1.8% drop.

With Italian yields remaining stubbornly above 7% despite ECB buying expect the single currency to come under further pressure.

The US dollar has once again outperformed, approaching one year highs against a basket of currencies, on the back of improving US economic data.

Until recently, good US data had seen the US dollar decline. However this correlation appears to be decoupling largely to do with the fact that further QE in the US is now much less likely.

Conversely, the single currency is likely to see further rate cuts going forward especially with the first ECB rate meeting of 2012 due next week.

Despite the rally in the US dollar, gold prices have continued to retain their resilience but need to get above the 200 day MA at $1,632 to alleviate additional downside risk.

The weekly candle chart appears to be forming a bullish candle reversal but this has to be confirmed on the New York close today.

Despite uncertainty about the situation in the Middle East any prospect of rising tensions are going to continue to be a factor on Brent prices for the foreseeable future, with investors nervous about Iran as well as events in Syria.

Even though prices are a little weaker today today’s suicide bomb in Damascus highlights the tensions in the region. If prices break above the three month highs around $116, we could see a move to $120 fairly quickly.

Copper prices have slid back as equity markets have struggled to push much beyond their recent highs.

CFDs, spread trading and FX are leveraged products and carry a high level of risk to your capital as prices may move rapidly against you. It is possible to lose more than your initial investment and you may be required to make further payments. These products may not be suitable for all customers therefore ensure you understand the risks and seek independent advice.

CFDs trading update from Michael Hewson, Market Analyst, CMC Markets.

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Festive cheer in the market seems to be running out as we move towards the end of the first trading week of 2012.

Disappointing Italian and Spanish PMI data more than offset a decent German figure and the Eurozone is looking more and more likely to be heading into another recession.

The Euro was under pressure for most of yesterday as risk was dumped and the US Dollar strengthened.

The theme is continuing this morning as the single currency continues to be sold.

European banks continue to make headlines for the wrong reasons as they park newly created ECB cash back at the central bank rather than lending or investing it in the real economy.

Retail gloom continues to hang over the UK with many of the retailers reporting crucial Christmas figures this week.

Next shares were pummelled after they reported disappointing sales over the festive period and set a gloomy tone as we wait for results from rivals M&S.

John Lewis were a ray of light in the gloom, posting impressive sales growth compared to last year, but most if not all retailers are suggesting that economic conditions remain a real concern and are expecting a challenging year.

The Pound has opened the year in much the same way as it finished the last, namely taking a back seat to the Euro and Dollar with economic fundamentals remaining less of a driver than politics.

Data from the US this week has been mixed, ISM manufacturing and Auto sales both showed growth month-on-month ahead of the consensus estimates but factory orders disappointed coming in on the lower side of estimates.

The CFDs online market is hoping for a clear sign of the economic picture on Friday from the Non-farm payrolls, either showing the recovery continuing or a worsening picture and the prospect of further QE this year.

More likely is that the number shows the US economy to the chugging along slowly, leaving both the Fed and the markets disappointed.

 
CFDs, margined forex and financial spread trading are leveraged products. They carry a high level of risk to your fund. It is possible to lose more than your initial capital outlay with these products and they may not be suitable for all investors, do ensure that you fully understand the risks involved, seek independent financial advice if necessary.

Content by CurrenciesDirect.com. This content should not be construed in any circumstances as a recommendation or solicitation of any offer to buy or recommendation or offer to sell any security or other financial instrument.