‘Green Shoots’ Withering

Dismal US Unemployment Figures
Recently it seems that the ‘green shoots’ of recovery have withered somewhat after miserable US jobs data sparked a return of risk aversion. For the past two months currency traders have speculated that the worst of the global recession was over despite warnings that the optimism was premature. Last week higher yielding currencies such as the euro and the Aussie dollar which have benefited from the recent optimism fell sharply on Thursday after data showed that the US shed 467,000 jobs in June.

Risk Aversion Dominant
Although the euro to dollar rate recovered somewhat on Friday but risk aversion still dominated currency markets and trading was light during the holiday weekend. Arne Lohmann Rasmussen of Danske Bank in Copenhagen stated, “There has been a bit of a recovery in risk currencies, which got really hammered yesterday. But with the U.S. closed it’s a bit of a dull market today, with everyone taking a breather after yesterday’s hectic movements.”

ECB President Says Euro Zone Economic Activity to Remain Weak
Earlier in the week the euro to dollar exchange rate had risen to a one month high of $ 1.4200 but fell back to $ 1.3991 on Friday. Remarks by European Central Bank President Jean-Claude Trichet who said that Euro Zone economic activity would remain weak put additional pressure on the euro. Forex traders are also anticipating the G 8 meeting this week which is bound to affect currency markets.

Risk Appetite Fading
The Japanese Yen benefited from poor stock market performance and advanced against the US dollar and the Euro. Like the US dollar the Yen is seen as a safe haven currency and traditionally benefits from risk aversion. Daragh Maher of Calyon, the investment-banking unit of Credit Agricole SA Stated, “We’re in an environment where risk appetite is fading and the yen in capitalizing. We haven’t had any decisive news to change the pessimistic mood.”

Investors Focus on G 8 Summit
The G8 meeting will likely be the focus of most Forex investors and traders this week  There will in all likelihood be a discussion of the US dollar’s status as a reserve currency which could shake up currency markets.

Jeff Davis is an expert financial writer and specializes in the Forex Market and currency trading. You can find his recent articles at: http://www.fxconverter.org

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