Currencies Update 11/25/08

Monday proved to be a good day for those trading EUR/USD, as contest stats show that contestants made the most in the pair, followed by USD/JPY and EUR/JPY. Furthermore, over 50% of the daily trading volume was contained to these pairs. Most of the top 5 contestants (as of Monday’s close) preferred a different pair though: GBP/JPY. In fact, contestant number 1 made over $85,000 in a single day trading the pair, bringing their currency trading portfolio balance to a whopping $329,723.13. This leaves the leader more than $40,000 ahead of contestant 2, but any sort of pick up in volatility or just a bad trading day can quickly change the game.

Looking ahead to the next 24 hours, there are a few key pieces of event risk to watch:

Asian Trading Session
**No major releases scheduled.

European Trading Session
11/26, 5:30 ET
UK GDP (3Q P) – The second reading of third quarter UK GDP is anticipated to confirm that the economy is experiencing its worst slowdown since 1990-1991. Indeed, the advanced results showed that GDP fell 0.5 percent in the third quarter from the previous quarter, following a complete stagnation. This deterioration comes as the result of a combination of restrictive monetary policy in the UK through mid-2008 along with the collapse of the housing sector and weakening domestic and foreign demand. If GDP happens to fall more than forecasted, the news could weigh on the British pound as it would add to speculation that the Bank of England will cut rates aggressively next week. However, if the data meets expectations, there may be little reaction in the forex markets.

US Trading Session
11/26, 8:30 ET
US Durable Goods Orders (OCT) – US Durable Goods Orders are forecasted to have dropped 2.7 percent and excluding transportation is anticipated to fall negative for the second consecutive month. Indeed, Boeing orders - a good leading indicator of this headline reading - slumped in October to 14, down from 41 in September .While the headline will have the most impact on forex trading, the markets should keep an eye on non-defense capital goods orders excluding aircraft, as this number serves as a leading indicator for business investment. The reading has contracted over the past two months, and combined with the weak outlook for demand of durable goods, the US dollar could ease back further.

Terri BelkasCurrency Strategist
Forex Capital Markets

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