The Forex Daily Digest - June 17, 2009

The dollar recovered a bit from losses against a basket of currencies early today as a drop in European shares induced traders to release some positions in currencies that are perceived as high risk. The dollar also got some relief after the leaders of the emerging BRICs nations decided to steer clear of any direct attack on the USD's dominance; although Russia did call for a much smaller role for the dollar.

The GBP fell the most in more than a week against the euro and posted a third decline in almost as many days against the USD after minutes of the Bank of England’s June 4th meeting indicated that policy makers voted unanimously to continue their asset- purchasing program this month, and expressing the opinion that it was just too early to know if the measures are working.

The dollar fell against the euro as traders trimmed their bets the Fed will raise interest rates this year in the midst of signs that deflation is beginning to take effect. The USD fell the most against the Singapore dollar as Fed fund futures pointed to a drop in expectations for a rate increase at the December central bank meeting.

Both political and monetary leaders in the so-called BRIC countries say they want a larger role in the world financial system as their foreign reserves expand and the U.S. economy continues to endure its worst financial crisis since the Great Depression of the 1930’s. The Dollar Index has fallen 9.4 percent from a three-year high in March. The BRIC nations account for 15 percent of the world economy and possess $2.8 trillion in foreign-currency reserves; that’s more than 40 percent of the total.

Federal Reserve Chairman Ben Bernanke and FDIC Chair Sheila Bair are scheduled to speak to the Operation Hope Financial Literacy Summit in Washington DC today. The state of the U.S. economy is slowing improving, as the all the twelve Federal Reserve District Banks indicated in the periodic “Beige Book” report that growth remains restrained, but the decline does show a bit of moderation. The major U.S. economic report of the day is the Consumer Price Index. Consumers are still cautious about what item to buy, but home sales are increasing and prices should again rise in the coming months. Also look for the EIA Oil Inventories report later in the morning.

President Obama will likely announce his plan to reorganize his method of how banks and other financial firms should be regulated in an effort of preventing another financial collapse. The president’s extensive plan would change the roles of some key agencies in an effort to tighten government supervision of the financial sector. Obama's plan will reportedly include a proposal to get rid of the embattled Office of Thrift Supervision and merge it with the Office of the Comptroller of the Currency.

The state of the Forex markets has never been more exciting. Make sure you are prepared for the trades ahead by getting the knowledge you need to make your trading choices. Take advantage of the free Internet presentations every day and listen to the JDfn pros explain to you what they see for the day ahead. Also, consider signing up for a JDfn webinar and learn all you can about trading. Here’s hoping you have a very profitable trading day today!

Happy Trading –

James Dicks