The dollar weakened after US consumer prices rose less than forecast in April on Wednesday, signalling that inflation would likely stabilise in the second quarter and that the Federal Reserve would cut rates in September.

This shift in the dollar value is the most favourable time to trade forex today.

Trade forex: Top FX trends

The Consumer Price Index climbed 0.3% last month, after rising 0.4% in March and February, the Labor Department’s Bureau of Labor Statistics said.

Over the 12 months ending in April, the CPI gained 3.4% after it rose 3.5% in March.

The median forecast of economists surveyed by Reuters called for the CPI to increase by 0.4% on the month and had it rising 3.4% on the year.

Trade forex: USD, Euro in focus

The dollar index, which tracks the greenback against a basket of major currencies including the yen and the euro, dropped 0.45% to 104.56.

The euro added 0.34% to $1.0855, while the dollar eased 0.72% against the yen to 155.28.

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The dollar is near its weakest levels against the euro and yen since mid-February.

This means there are some forex trading opportunities today.

Trade forex: Downtrend in inflation

A general downtrend in inflation, and growing chances that the Fed will reduce rates, is already causing the forex market to respond in kind.

But no matter if you specialise in euros, yen or other major currencies, the forex trading scene presents opportunities for traders to take advantage of the changing dollar value in forex trading.

Stock trading trends: Record high shares – start trading!

For the ambitious forex trader, this evolving landscape creates strategic entry points and opportunities for profit.

Taking into account the recent data and the market reactions, it is high time for you to trade forex today by taking advantage of the clashing currency values and the coming Federal Reserve policy.

High public debts generally result from large shocks to the economy driven by political events that require massive spending to try and maintain stability and to trade forex.

So clamping down on debt can stoke ‘creative’ ways that markets may struggle to price.

Trade forex: War in Ukraine hitting economies

The costs of the new spending needed to recover from the pandemic, in a backdrop of new geopolitical realities, such as investment in green energy, the cost of producing domestic semiconductors for security, or the extra defence spending bills to support Ukraine, are just some of the factors that are now being priced into expected future budgetary deficits and debt.

The issues of sustainability of debt have taken on new importance for today’s forex traders.

Trade forex: Western World on war footing

This fault line runs through the entire Western world, but, given the size of its challenge, much of the talk about mounting indebtedness focuses on the United States, and while it should, so should forex traders today.

Trade forex: US debt to rise

According to the Congressional Budget Office, in the next 10 years the US public debt-to-GDP ratio is expected to jump by 17 percentage points to 116% – twice the average of the past two decades – and continue to climb to 166% by 2054. As the Federal Reserve chair Jerome Powell recently put it: US fiscal policy is ‘on an unsustainable path’.

The cost of servicing US public debt as a percentage of GDP (namely the average interest expense on the debt divided by the GDP) has more than doubled since it hit a record low in April 2021, reaching 3.23% (the highest in 14 years) as a consequence of the Fed’s rate increases to tame post-pandemic inflation.

Trade forex: Robust growth

Robust growth and above-target inflation have persisted despite monetary tightening, which is reflective of the demand stimulus delivered by unchecked deficits, signifying that the Fed is tightening policy much more than many had hoped.

This environment opens up opportunities as well as perils for today’s forex traders.

The CBO’s long-term debt projections with relatively modest assumptions about coming borrowing costs – average debt service costs exceeding the 20-year average of 3.7% only by 2054.

These rely on rather daunting interim debt accumulation and the projected ‘primary’ budget gap not (absent years with recession and/or depression) ever again falling below 2.0% of GDP for the next three decades.

Trade forex: Trading opportunities for traders in US markets

Total debt service costs are slated to consistently exceed growth and nominal GDP projections from 2044 on. For anyone currently learning how to trade forex , this is the important number.

Even the International Monetary Fund predicts that the annual US deficit will not dip below 6% of GDP for the next five years (down slightly from this year’s 7.1%).

Without fiscal restraint in this election year and with persistent inflation continuing to keep Fed easing in check, the fixed income nerves evident in the bond market have become increasingly jittery.

All of this is essential for today’s forex trader.

Trade forex: Fiscal firepower

The justification for fiscal firepower has also changed, with the ‘war economy’ justification less to do with sustainable financing and more to do with immediate threats to the US and its rivals – whether existential (such as those to US democracy) or geopolitical.

This perspective deliberately sideswipes narrow issues of debt sustainability in favour of broader economic and political objectives.

Those trading on the foreign exchange (forex) markets today would do well to bear this in mind.

Trade forex: Euro trading trends

The French president Emmanuel Macron had been on the same track months earlier, calling on the European Central Bank to expand its charter to one of faster growth as well as to fighting climate change.

And UniCredit’s chief economic advisor Erik Nielsen lambasted the ECB’s recent tightening as a ‘medieval’ policy that will kill the recovery of investment in the euro economy.

All of which should be in the back of your mind when you sit down to torch the red dollar today.

Indeed, the drive towards grappling with central bank independence has become part of the conservative agenda.

Allies of Republican US presidential candidate Donald Trump are drawing up plans for clawing back Fed independence should Trump win, including a demand that Trump have a veto over rate moves and the power to fire the Fed chair before the end of their term.

These developments create more layers of uncertainty for forex traders today.

To sum up, the interaction between fiscal and monetary policies create an environment rich in opportunities and risks for forex traders today.

In this sense, the rising level of indebtness and the increasing geopolitical tensions that impact economic decision-making present significant opportunities and risks for forex traders today.

Therefore, it is important to acknowledge and keep these factors in mind to be successful in forex trading.

Trade forex: Eurozone mortgage market

Stress on the euro zone mortgage market was ‘manageable’ even though higher borrowing costs were pushing borrowers to the limit and some banks had not been sufficiently strict in their checks, the European Central Bank (ECB) said on Wednesday.

Soaring interest rates, brought about by the ECB to bring down inflation, have hit house prices – particularly in countries where the housing market boomed when rates were at historic lows, such as Germany.

The ECB also reviewed the mortgage books of 37 euro zone banks, representing 40% of the 3.7 trillion euros ($4.00 trillion) the sector owes on residential real estate (RRE) – the collateral underlying the lion’s share of European mortgages.

The results of the review were reassuring. ‘While the review showed that a number of RRE conduits feature challenges, the picture overall looks positive,’ the ECB said in its newsletter. ‘RRE is under some stress, but this is manageable.

And there are signs that RRE banks are actively engaged in tackling concerns.’ Those glimpses into the places where we all live have a very real impact today on currency traders.

With 1.4 trillion euros of home loans still outstanding – some 412 billion euros of which are scheduled to have their interest rates reset as of June 2025 (almost certainly, at a much higher rate) unless the borrower can meet the higher payments – the outlook for anyone trading forex today is a perfect blend of opportunity and potential pitfalls.

The ECB’s review also noted that lenders are still not conducting sufficient credit checks before agreeing to mortgage loans: 16 years after a global financial crisis triggered by the mortgage market, 10 years after the ECB took over bank supervision, there was no clear cap on loan-to-value ratios.

This showed no clear cap on the ratio between the loan servicing cost and the borrower’s income, and thresholds could anyway be overturned.

In particular, 46.5%of all mortgages taken out in the year to June 2023 had a loan-to-value ratio greater than 80%, and in 16.5% of cases the loan exceeded the value of the property.

For traders of forex today, these types of lending should also be flashing red lights concerning economic fragility.

Banks seemed to roll the dice most recklessly just before, or when, the rates took off: between June 2021 and June 2023, the percentage of mortgages extended to those with 30% or more of their income spent on servicing the loan rose from 47% to almost 53%: ‘The 30%threshold in itself is not risky but it is there that deterioration might start to show,’ ECB noted.

For 40% of new mortgage loans originated in the year to June 2022, no collateral valuation was done by a valuer, and throughout the buy-to-let boom banks ‘appeared to be challenged in assessing the repayment capacity of borrowers’.

The ECB told banks to clean up these weaknesses. ‘On the whole, although there are areas where further action seems warranted, the banks’ responses reflect a willingness to address risks and stabilise the RRE landscape,’ it wrote.

These findings add an important contextual layer to the traders of forex today, showing that these efforts to de-risk the banking sector continued over time.

Such data point can help traders as they formulate judgments in the wake of the COVID-19 pandemic.

Raiffeisen Bank International (RBIV.VI) was given written notice last month that restricting its ability to access the US financial system could be on the horizon because of its activities in Russia.

An individual with knowledge of the matter described a letter from the US Treasury to the Vienna-based bank on 6 May.

The missive from Deputy Secretary of the Treasury Wally Adeyemo is said to cite concerns about RBI’s presence in Russia and a $1.5 billion deal with a Russian tycoan that was subsequently cancelled and is now under investigation.

Current conditions in currency markets make it an especially perilous time to be a trader of forex.

Though the deal with Oleg Deripaska was nixed only a couple of weeks after the letter was sent out, the US Treasury still seems to be nervous about RBI’s business in Russia.

The warning represents the most drastic action taken so far against the largest Western bank still doing business in Russia, and it reflects continued pressure from Washington that has pecked away at RBI for more than a year.

For those looking to buy cryptocurrency today for the first time, or who want to trade forex, such geopolitical pressures can lead to volatility in the currency markets.

While many Western governments and firms have cut off ties with Moscow in the period since Russia’s invasion of Ukraine more than two years ago, Austria is still connected to Russia via key gas pipelines, and Vienna is still a hub for cash moving out of Russia and Russia’s ex-Soviet neighbours.

Reuters reported in March that the Deripaska deal – which Raiffeisen had put forward as a means of freeing up cash trapped in Russia – had drawn ‘strong opposition from the US’. These dynamics are crucial to understand if you want to trade forex today.