The news is sparking some optimism that global trade will be enhanced by the news. Chinese officials like to keep the yuan low relative to other currencies (especially the U.S. dollar) as a way to maintain the upper hand in the import/export game. With China pledging more yuan flexibility, and backing it up with yuan appreciation, many investors are feeling optimistic.

As a result, the U.S. dollar is lower today, down against risk currencies as investors become bolder. The U.S. stock market has opened significantly higher, with the Dow more 100 points up minutes into trading. With investors looking for better returns, and the yuan decision adding to optimism, it is little surprise that the U.S. dollar is being sold in favor of other currencies.

See Also

• Yuan Influence on the Currency Market
  Forex trading on the currency market

The latest news out of Germany isn't likely to help matters much. The German Trade Balance was lower than expected, and disappointing. With Germany the largest economy in Europe, the euro zone relies heavily upon it to help support the euro in forex trading.

Germany's latest trade data, though, indicates that exports may not be the way to save the euro in forex trading after all. GFT's Boris Schlossberg reports in FX360 on the implications of exports on the euro in forex trading:

Euro’s sharpest fall did not occur until May, therefore currency markets will have to wait to see if the further depreciation in the currency  will have any positive impact on export growth over the next several months. If exports do not increase materially the unit could see more selling pressure as traders begin to price in the possibility of a recession in H2 of 2010 in the world’s largest economic bloc.

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• Euro in Forex Trading
  Currency trading on the forex market

However, the campaign isn't over yet, and concerns about the sterling remain. As a result, the cable rally has lost steam against the U.S. dollar in currency trading, and is now back in losing territory.

Indeed, even as the U.S. dollar weakens against the euro and the yen in forex trading, it is gaining against the U.K. pound. Public debt concerns continue to plague the sterling, and will until even more proof of an improving economy is seen.

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• Looking for Patterns in Currency Trading
  Forex trading on the currency market

The Aussie is making an attempt to overcome the resistance set at 0.9300, and continues to hammer above the barrier, in order to transform that level into a support. 

The Australian dollar is deriving support in currency trading from the fact that it is the highest yielding currency in the developed world right now, as well as the fact that Australia's economy seems to be doing well, with some help from demand for Aussie resources in China.

See Also

• Aussie and Forex Trading
  Currency trading and economic data

Even though the FTSE 100 is markedly higher today, and U.S. markets are struggling into the black, the sterling isn't getting much support in forex trading.

Public debt worries and somewhat lukewarm economic data continue to weigh on the U.K. pound in currency trading. On top of that, investors are still wary of happenings in Greece, and concerned about the strength of economic recovery in the U.S. That is leading to some concerns about risk, and the sterling is suffering in forex trading because of it.

See Also

• Currency Trading with the U.K. Pound
  Forex trading on the currency market

However, some feel that Bernanke is right to be cautious. GFT's Kathy Lien examines the U.S. dollar and Bernanke in FX360:

Despite clear improvements in the labor market and retail sales, the Fed Chairman remains skeptical about their sustainability. ...

His cautiousness may appear bizarre to many people who watched U.S. data consistently surprise to the upside.  Unfortunately we do not think that Bernanke’s denial is misplaced.  Like a good Fed Chairman, he wants to make sure that each improvement in the economy is sustainable before he decides to take another step to normalize monetary policy.  He is not questioning the trajectory of the U.S. economy but with the possibility of job growth being temporary and the difficulty of unemployed Americans to find jobs, he wants to see more positive reports before making another major announcement.

With today's initial claims data showing more job losses, and with concerns about Greece persisting, it appears that Bernanke is at least a little bit justified.

The U.S. dollar is actually higher today, but due more to uncertainty and a desire for a safe haven than any fundamental reason.

See Also

• Economic Data and Forex
  Currency trading on the FX market

Federal Reserve Chair Ben Bernanke is testifying before Congress today and tomorrow, and today he said that the economy is not yet sustainable. So, even though there was a boost to the discount rate last week, the Fed isn't ready to really tighten monetary policy yet.

As a result of these remarks, the U.S. dollar is lower in forex trading. Dollar bulls are disappointed that monetary tightening will not be happening anytime soon, and the euro has been waiting for a chance for a few days now.

It will be interesting to see how things go from here, and what Ben Bernanke has to say about economic progress in further testimony -- and what he plans to do in order to exit from economic stimulus while limiting inflation.

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• Economic News and the Currency Market
  Forex trading news and information

The State of the Union Address comes on the heels of a monetary policy meeting from the Fed, in which one member of the board dissented, reports FX Street:

Fed member Hoenig dissented in the vote; as he believed “that economic and financial conditions had changed sufficiently that the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted”.

This is an interesting turn of events that indicates that, perhaps, the Fed is going to start moving away from loose monetary policy. While this is unlikely to happen in the immediate future, if Obama's plans work out and economic growth gets moving, we could see higher interest rates by the middle to end of 2010.

See Also

• Economic Data and Currency Trading
  Information for forex traders

With China limiting its lending, concerns about global growth are paramount. Volatility is high as forex traders rush to reposition themselves and try to figure out what could happen next.

For now, though, the U.S. dollar is gaining across the board, with the exception of its loss with regard to the Japanese yen.

See Also

• Currency Trading with the U.S. Dollar
  Forex trading on the currency market