US Recovery to be Slower Than Ecpected
The US dollar gained on the euro after US economic data showed that the US recovery from the current recession is likely to be slower than previously thought. Third quarter GDP data from the US Department of Commerce showed that the US economy grew at a slower pace than earlier government estimates. The consumer confidence report showed a weak labor market. The data showed that the US economy grew 2.8% far lower than the government’s estimate of 3.5%. The US has suffered massive job losses throughout the recession. Alan Ruskin of RBS Global Banking and Markets stated, “The (consumer confidence) breakdown is less encouraging with the main components that broadly track PCE (in coincident fashion) generally weak. That includes the present situation numbers, and the labor market indicators that show jobs hard to get remaining at extraordinary high levels…This has triggered profit-taking on short dollar exposure.”
Risk Appetite Dimmed by GDP Figures From US
The Japanese yen rose to six week highs against the dollar partially because of safe haven demand. On Tuesday the yen traded at 88.36 and the dollar fell 0.5% on the day. The euro vs. dollar rate fell 0.2% and the euro traded at $1.4934. The euro had gained earlier as better than expected German sentiment survey offset German banking concerns among investors. The euro which is usually tied to risk appetite fell after dismal US economic data and GDP figures. Jacob Oubina of Forex.com said, “This (GDP) number is slightly negative for risk appetite because of the downgrade in the personal consumption number. But overall, this is an old number and it should have limited impact going forward.”
Fed Minutes to be Released
Later today (Tuesday, Nov 24th) the US Federal Reserve will release the minutes of the meeting which took place on November 3rd and 4th. Investors and traders will be watching for indications of when the Federal Reserve will withdraw stimulus measures. The Fed minutes are also expected to include economic projections.
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