Turbulence on the Forex

At Sunday night’s opening of the Forex traders saw a huge gap which illustrates the lack of effectiveness, if not the impotence, of the largest economies in the world – represented by the G7.

As early as 23.00 on Sunday evening EUR/USD opened 60 pips lower than its Friday closing and GBP/USD had gained 120 pips before the first trade!

The G7 failed to produce concrete decisions and lacked firmness towards protectionism. These two factors combined with the poor coordination of the member countries, has reduced risk aversion which in turn has propelled the JPY and the USD upwards.

This is an interesting week for forex traders. In the U.S. yesterday was a public holiday – Presidents Day. In Japan the impact of the financial crisis – Japanese GDP down -3.3% and industrial production down 10% – was highlighted by the resignation of the Finance Minister. At the same time China announced that they had experienced a loss of 32.6% in foreign investments in one year.