May Day Celebrated in Europe and Asia

Forex trading is expected to be light this weekend as Europe and Asia celebrate the traditional May Day holiday. Also affecting currency exchange rates is the postponement of the release of US bank stress tests. Many investors remained cautious in advance of the stress test results and PR firms representing US banks have been working overtime to put a positive spin on what could be bad news.

Pandemic Concerns

Earlier in the week currency exchange rates were affected by concerns of a possible global pandemic and its effect on insurance companies and triggered a round of risk aversion. In mid week risk appetite made a return affecting the euro to dollar exchange rate. The euro gained for four straight sessions and the big winners were the Aussie and Kiwi dollars.

Fed Keeps Rates Same

The dollar to yen and the euro to dollar rates were affected in mid week by the Federal Reserve statement which said that interest rates would be kept at present levels and that the economic outlook showed slight improvement. Greg Salvaggio of Tempus Consulting said that the Fed is “noting modest signs of improvement and will keep the target at the present levels, as expected. For the currency markets, the Fed’s statement seems to be helping the dollar a bit, in particular against the yen.”

Slowing US Contraction

Better than expected figures showing a slowdown of economic contraction in the US prompted a rally on Wall Street which also affected currency exchange rates. By weeks end rising risk sentiment put pressure on the dollar and the Yen although some investors remain cautious about the health of the US banking sector.

Weekend Trading Thin

Recent economic data has led many to believe that the worst of the recession is over and has had an effect on global currency exchange rates. Investors were encouraged by increased Chinese industrial production and somewhat encouraging US job figures. Trading is expected to be thin during the May Day holiday weekend.

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