Daily FX Updates

According to the Daily FX news, The Dollar rose again against the Euro, which hit a new month low of 1.31 USD, even after the release of a poor US retail sales report which saw sales fall 2.7% in December. Fears over a broadening global recession were realized when Standard and Poor’s downgraded Greece’s credit rating to A- / A-2, something they had warned about doing last week. Forex traders continued their move towards the US Dollar as it is still believed in the investor community that the US currency is a safe bet.

Although the news in the US has not been great as of late, the trading and investing trends has continued to work in favor of the US as Europe continues fielding bad economic news and speculation. Forex brokerages have seen continued selling of the Euro by their customers on news of an imminent rate cut. Adding to the fire in Euro-land was Germany’s declaration that its economy shrank 2.0% in the last quarter of 2008. Coupled with the S&P downgrade of Greece was the now very real prospect that Spain and Portugal were to follow after they too received warnings a short while ago. Look for continued weakness in the Euro as more countries begin reporting their Q4 economic data.

The Euro also fell against the Japanese Yen, albeit slightly to 117.11. The Yen also traded up and down slightly all day against the USD, which was looking at a mild gain towards the end of the day. Japanese officials are monitoring the strength of the Yen in an effort to perhaps keep it from getting much stronger. It is believed that a strong Yen will hurt Japanese exports which, in this environment, are crucial to their economy.

India has said that their inflation will fall to between 3% and 4% by the end of Q1. Normally a drop in inflation is good news however given that many countries are experiencing severe deflation in this economic crisis, this raises flags for India. An economic crisis in India can have a large impact on the overall global economy. This is something to watch in the near future.