Forex Fundamental Analysis

The effects of last week’s surprise decision by the Bank of England to intensify their quantitative easing program continue to ripple through the markets.

The Bank of England’s Monetary Policy Committee surprised many observers Thursday by increasing the size of its quantitative easing measures by an additional £50 billion.

The Dollar has continued to trade weakly against other major currencies as global equity markets have extended their surges to post-crash highs.

The Euro, the Canadian dollar, and the U.K.’s pound, have all been gaining against the dollar and yen today in response to the U.S. economy contracting less than expected in the second quarter.

The Japanese Yen gained ground against major currencies on Tuesday as a decline in U.S. consumer confidence spooked investors.

Challenging the recent rally in stocks that has taken some by surprise and driven the markets higher in a surprisingly smooth ride, short interest in S&P 500 futures has been building up since May 2009.

New home sales continue to rise, carry trades are back in the spotlight, and predictions of resurgent global market proliferate.

The British Pound strengthened against both the U.S. Dollar and Japanese Yen on Monday, as traders again moved away from safe-haven currencies after better-than-forecast home sales data was released in the United States.

The U.S. Dollar is expected to continue its recent declines as corporate earnings reports give traders hope that an economic recovery is starting to take hold.

We expect continued pressure against the Dollar so long as corporate earnings and economic data point towards an eventual recovery towards the end of 2009.

The British Pound surrendered early gains as economic data revealed continuing problems for the U.K. economy.

Weakness in the U.S. Dollar has continued in recent sessions as traders are willing to place riskier bets in light of better-than-expected corporate earnings data. The safe-haven Dollar and Yen trades have both suffered from the move towards higher-yielding currencies.

The British Pound was weak against major currencies as an economic research institute projected continued declines in GDP and housing prices and warned that a substantial recovery may not occur for several years.

The Euro broke above its recent trading range against the Dollar and moved to a nearly seven-week high as increasing signs of recovery in corporate earnings reports encouraged traders to abandon their safe-haven buying of the U.S. Dollar.

Currency traders face a relatively light week in terms of U.S. economic data. On Monday, the Conference Board’s report of leading economic indicators for June will be released and on Thursday, the Department of Labor will release initial jobless claims data for the previous week.