Dollar broadly higher vs. rivals in cautious trade

The U.S. dollar was broadly higher against the other major currencies on Friday, as market sentiment weakened after disappointing euro zone data, while investors eyed key U.S. budget talks later in the day. 

During European morning trade, the dollar was lower against the euro, with EUR/USD shedding 0.22% to 1.3028. 

The euro came under pressure after preliminary data showed that consumer price inflation in the euro zone ticked down to a annualized rate of 1.8% in February, from a rate of 2.0% the previous month. 

A separate report showed that the unemployment rate rose to a new record high of 11.9% in January from 11.8% the previous month. Analysts had expected the rate to remain unchanged at 11.8% in January. 

Earlier Friday, Markit research group said that Spain's manufacturing purchasing managers' index improved to 46.8 in February from 46.1 the previous month, beating expectations for a rise to 46.5, while Italy's manufacturing PMI fell to 45.8 last month from 47.8 in January, compared to expectations for a reading of 47.6. 

In addition, official data showed that German retail sales rose 3.1% in January, beating expectations for a 1% increase, after a 2.1% decline the previous month. 

The greenback was also higher against the pound, with GBP/USDdropping 0.89% to 1.5028. 

The pound dropped to 31-month lows against the greenback after Markit said that the U.K. manufacturing PMI deteriorated unexpectedly in February, falling to 47.9 from a reading of 50.8 the previous month, re-entering contraction territory for the first time since December. 

Analysts had expected the index to rise to 51.0 last month. 

In a separate report, the Bank of England said that net lending to individuals fell to GBP0.6 billion in January, from GBP1.8 billion the previous month, exceeding expectations for a decline to GBP1.1 billion. 

Elsewhere, the greenback was higher against the yen and the Swiss franc, with USD/JPY advancing 0.37% to trade at 92.90, and withUSD/CHF rising 0.38% to 0.9401. 

In Switzerland, data showed that the SVME PMI fell to 50.8 in February from a reading of 52.5 the previous month, compared to expectations for a reading of 52.2. 

The greenback was higher against its Canadian, Australian and New Zealand counterparts, with USD/CAD edging up 0.14% to 1.0321,AUD/USD slipping 0.18% to 1.0196 and NZD/USD falling 0.10% to 0.8240.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.32% to 82.25. 

Markets were also jittery as automatic spending cuts in the U.S. worth USD85 billion were due to be introduced on Friday after U.S. lawmakers failed to reach a deal to avert them. 

U.S. President Barack Obama invited congressional leaders to the White House for last minute negotiations before the 11.59pm deadline. 

Later in the day, the U.S. was to release a report from the Institute of Supply Management on manufacturing activity, official data on personal spending and revised data on consumer sentiment from the University of Michigan.

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U.S. futures lower amid "sequester" worries; Dow Jones down 0.24%

U.S. stock futures pointed to a lower open on Friday, as investors remained cautious ahead of upcoming U.S. budget talks, expected later in the day, while renewed concerns over the situation in the euro zone weighed. 

Ahead of the open, the Dow Jones Industrial Average futures pointed to a 0.24% fall, S&P 500 futures signaled a 0.35% drop, while the Nasdaq 100 futures indicated a 0.25% loss. 

Markets were jittery as the "sequester" of USD85 billion of automatic spending cuts was set to hit at midnight on Friday. 

U.S. President Barack Obama was to meet with Congressional leaders at the White House during the day to discuss ways to avoid sequestration striking, but hopes were low for a deal as Democrats and Republicans have so far failed to reach a compromise. 

Meanwhile, disappointing data from the euro zone sparked fresh concerns over the outlook for growth in the bloc. A report earlier showed that the unemployment rate in the euro zone rose to a new record high of 11.9% in January from 11.8% the previous month. 

Retailers were likely to be in focus, as Gap's fourth-quarter profit beat estimates, thanks to higher comparable store sales in North America. Shares surged 2.36% in after-hour trade. 

Financial stocks were also expected to be active, after Bank of America said in a securities filing on Thursday that the New York State Attorney General was investigating the bank over its purchase, securitization and underwriting of home loans.

The news sent shares in the U.S. lender down 0.36% in pre-market trade. 

Consumer electronics group Best Buy was also lower in early trading, dropping 0.67%, after the Wall Street Journal reported that the company ended talks with founder Richard Schulze over a deal in which he and a group of buyout firms were proposing to take a minority stake in the firm in exchange for three seats on the board. 

Elsewhere in company news, Boeing was reportedly preparing to cut hundreds of jobs at a South Carolina plant that makes 787 Dreamliners over the course of this year. 

Separately, Groupon, up 4.19% pre-market, fired on Thursday Andrew Mason as CEO for failing to put an end to the gradual erosion of the company's main daily deals business. 

Across the Atlantic, European stock markets were sharply lower. The EURO STOXX 50 plummeted 1.24%, France’s CAC 40 tumbled 1.16%, Germany's DAX retreated 0.92%, while Britain's FTSE 100 slid 0.51%. 

During the Asian trading session, Hong Kong's Hang Seng Index dropped 0.61%, while Japan’s Nikkei 225 Index advanced 0.41%. 

Later in the day, the U.S. was to release a report from the Institute of Supply Management on manufacturing activity, official data on personal spending and revised data on consumer sentiment from the University of Michigan.

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WHY LOSE

Top 10 ways new forex traders lose money:

Statistics show that the initial success for new forex traders is disturbingly low. Over time, this trend tends to improve, but for many, it is too late. After posting a series of losses, many new traders will give up, believing that forex trading is simply not for them. It doesn't have to be this way.

• 1. Lack of experience
  Forex trading - like any new initiative - has a learning curve. However, unlike learning a new skill such as learning to play guitar for instance, you are not risking your entire savings while discovering the difference between a major and minor chord. Learning about the currency markets and basic trading principles solely on a trial and error basis is not a recommended approach for gaining the skills necessary to be a successful forex trader.
  Most online forex brokers offer a practice version of their trading platform that offers the very same experience as a live trading application. Typically, once you create a practice account, you are free to trade and deal as you wish risking only the "play" money used to seed your account.
  With a practice account, you can see how the market reacts to economic forces including news events without actually risking your investment capital. However, you must treat this account seriously if you expect to learn from the experience. If you simply shrug off a loss without understanding why the loss occurred, then you are wasting your time and setting yourself up for disappointment. Take advantage of this unique forex market training tool before committing your money to a real trading account.
• 2. Unreasonable expectations
  First off, stop believing all the "get rich quick" hype still perpetrated by some forex dealers. Yes, there are those that do get rich trading forex but some people also get rich selling houses. In either case, it does not happen overnight and it might take years to gain the experience and insight to turn forex trading into a full time, successful occupation.
  As a new trader, if you manage to stay in the game without losing all your money in the first few months as is all too common - then you may be able to learn what is required to be profitable. In other words, don't quit your day job just yet.
• 3. Absence of a sound trading plan
  Next to having unreasonable expectations with regards to the risks associated with forex trading and the amount of time required to be successful, a common mistake made by new traders is the lack of a trading plan. In reality, there are two aspects to this plan, an overall objective for your trading activities and a plan for each trade you make.
  Your overall objective should include the currencies that you intend to deal in, the amount of leverage you will use, and the amount of time you intend to devote to your trading activities. Your plan must also include a realistic rate of return you expect to achieve. In addition to your overall objectives plan, you also need an exit strategy plan for each trade you make that includes the upper and lower boundaries of the trade.
  In other words, you must identify the level at which you will close positions and take your profits (take profit order) or in the case of a losing trade, the level at which you are prepared to go before you get out of the trade thus limiting your losses (limit order). We will talk more about stop loss and take profit instructions later.
• 4. Lack of discipline
  A plan is only of value if you actually have the patience and the discipline to follow it. While this can be difficult, it is necessary if you expect to be successful, and it is this very reason why developing a plan prior to the trade is so fundamental. As rates fluctuate, you can easily get caught up in the market and it is only human nature that you will begin to second guess your actions. If, for instance, the rate moves up surpassing your original take profit point, you may be tempted to hold out for an even higher return, alternatively, if the price drops below your limit level but you believe there is a big rebound just around the corner, you may be tempted to keep the order open on the hopes of a reversal.
  But does either scenario really make sense? If before you entered the trade you had a sound reason for establishing both your take profit and your loss limit levels, how likely is it that conditions have changed so much that now you are prepared to throw your previous assessments out the window in the heat of the battle? Can you be sure that you are not acting on emotion rather than sound analysis?
  This is why a plan is so important - it allows you to avoid the emotion that is bound to arise during times of volatility.
  Now this is not to say that a trading plan can never be revised - in fact, your overall objectives should be re examined every few months or even more frequently if required. As well, it may be necessary sometimes to abandon a plan mid trade if market conditions warrant but this should be the exception and not the norm.
  And yes, sometimes the market can be so volatile that no amount of planning will produce positive results. In this case, maybe the best option is simply not to trade until you can get a better handle on things. Never allow yourself to fall into the "I have to do something" trap - sometimes the best plan is to do nothing.
• 5. Failure to include stop loss and take profit instructions
  When you place a market order and leave it open - that is, enter a trade at the market price without instructions to close the order - you are in effect, gambling with the total value of your account. For this reason, you should consider adding stop loss instructions to all open positions.
  For instance, if you are holding a long GBP/USD position, you can include a stop loss instruction that automatically sells your long position if the rate falls to a certain level. In this way, you can limit the amount that you could lose on any given trade - even if you are unable to constantly monitor your account.
  Take profit orders are similar in that they allow you to establish the rate at which you want open positions closed in order to lock in profits. Again, you simply need to identify the rate at which to take the profits, and the trading system closes the position without further intervention on your part.
• 6. Excessive leverage
  Depending on your experience level, trade leverage can be a powerful tool to help you maximize returns, or it can be the cause of your downfall. It is not something to be taken lightly and if you do not understand how it works, don't trade until you do understand.
• 7. Holding too many open trades
  Fighter pilots call it "helmet fire" and it happens when too much is happening around you too quickly for you to react. In the cockpit of a jet fighter, it can get you killed - as a forex trader, you may not end up dead but you will probably end up broke.
• 8. Holding losing positions too long
  One of the things that really separates seasoned forex traders from those just starting out is their ability to determine when a losing trade is not going to reverse the trend. Rather than "hold and hope", disciplined traders will take the loss and get out much more quickly.
  This is another reason to set protective stops on all your trades, if you include effective stops when you submit a new trade, you can at least limit your losses without having to spend too much time "babysitting" the order. If the trade hits the stop, you will lose the amount committed but you also protect the bulk of your capital, leaving you with funds to move into something else that, hopefully, will be more profitable.
  Sometimes, you just have to treat these things as life lessons - learn and move on.
• 9. Ignoring rate spread fluctuations and the impact spreads have on profitability
  Exchange rate spreads - the difference between the bid and the ask price - are of utmost importance and directly affect the profitability of each trade. You need to be aware that spread differentials can fluctuate wildly during the day - sometimes to the point of turning a profitable trade into a loosing one.
  You also need to understand that spreads will widen during off market hours when volumes and liquidity are lower. In addition, spreads tend to widen ahead of important news such as an impending interest rate decision or the latest employment results.
• 10. Thinking about the "big win" more than effective cash management, also known as greed
  This one is pretty straight forward - greed, or more correctly, how greed can cause you to enter into ridiculous trades. This must be the same gene that causes some people to keep "doubling down" even when the odds are so against them that it make no sense at all. If you want to gamble, go to Vegas.

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Forex - GBP/USD drops to 31-month lows on weak U.K. data

The pound dropped to 31-month lows against the U.S. dollar on Friday, as the release of downbeat U.K. economic reports added to concerns over the country's outlook for growth. 

GBP/USD hit 1.5054 during European morning trade, the session low; the pair subsequently consolidated at 1.5044, dropping 0.79%. 

Cable was likely to find support at 1.5034 and resistance at 1.5186, the session high. 

Markit research group said that the U.K. manufacturing purchasing managers' index deteriorated unexpectedly in February, falling to 47.9 from a reading of 50.8 the previous month, re-entering contraction territory for the first time since December. 

Analysts had expected the index to rise to 51.0 last month. 

In a separate report, the Bank of England said that net lending to individuals fell to GBP0.6 billion in January, from GBP1.8 billion the previous month, exceeding expectations for a decline to GBP1.1 billion. 

The reports came after revised data on Wednesday confirmed that the U.K. economy contracted 0.3% in the three months to December, in line with initial estimates and economists’ forecasts.

The economy expanded by 0.3% year-on-year, better than initial estimates of flat output.

The weak data reinforced concerns over the threat of a triple-dip recession, after ratings agency Moody’s downgraded the U.K.’s triple-A rating by one notch last week, citing a weak outlook for growth and a rising debt burden.

Meanwhile, expectations for further monetary easing by the BoE remained intact after the minutes of the central bank’s February meeting indicated that policymakers are moving closer to another round of asset purchases. 

Market sentiment was also under pressure as automatic spending cuts in the U.S. worth USD85 billion were due to be introduced on Friday after U.S. lawmakers failed to reach a deal to avert them. 

U.S. President Barack Obama invited congressional leaders to the White House for last minute negotiations before the 11.59pm deadline. 

Sterling was also lower against the euro with EUR/GBP climbing 0.80%, to hit 0.8679. 

Later in the day, the U.S. was to release a report from the Institute of Supply Management on manufacturing activity, official data on personal spending and revised data on consumer sentiment from the University of Michigan.

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European stocks edge higher on Spain data, eyes on U.S.; Dax up 0.24%

European stocks edged higher on Friday, after upbeat Spanish manufacturing data, although investors remained cautious amid concerns over final U.S. budget talks and as worries over the political deadlock in Italy continued to weigh. 

During European morning trade, the EURO STOXX 50 edged up 0.13%, France’s CAC 40 rose 0.20%, while Germany’s DAX 30 added 0.24%. 

Markit research group said that Spain's manufacturing purchasing managers' index improved to 46.8 in February from a reading of 46.1 the previous month, beating expectations for a rise to 46.5. 

But investors remained cautious amid fears Italy would not be able to continue to implement economic reforms following inconclusive election results. 

Markets were also jittery after U.S. after Republicans and Democrats failed on Thursday to agree on an alternative deficit-reduction plan, putting the country on the path towards USD85 billion in automatic budget cuts. 

U.S. President Barack Obama invited congressional leaders to the White House for last minute negotiations before the 11.59pm deadline on Friday. 

Financial stocks were broadly lower, as French lenders Societe Generale and BNP Paribas fell 0.17% and 0.49%, while Germany's Deutsche Bank and Commerzbank tumbled 1.88% and 0.57% respectively. 

Peripheral lenders added to losses, with Spanish banks Banco Santander and BBVA dropping 0.37% and 0.24%, while Italy's Intesa Sanpaolo and Unicredit declined 0.24% and 0.82%. 

Elsewhere, Spanish builder ACS added 0.16, even after posting a loss of EUR1.93 billion for 2012, exceeding analysts' estimates. The company said the disposal of its stake in Iberdrola SA led to a charge of EUR1.31 billion. 

In London, FTSE 100 inched up 0.05%, as markets eyed the release of U.K. manufacturing data later in the day. 

U.K. lenders tracked their European counterparts broadly lower, as shares in HSBC Holdings declined 0.47% and Barclays retreated 0.41%, while Lloyds Banking and the Royal Bank of Scotland plummeted 2.26% and 2.59% respectively. 

Mining stocks were also on the downside, with BHP Billiton and Rio Tinto plunging 0.80% and 1.23%, while copper producers Xstrata and Kazakhmys dove 3.40% and 4.20% 

On the upside, WPP Plc added 0.09%, after the world’s largest advertising company said earnings rose 7.1% last year as profit margins improved after the business increased investment in digital and emerging markets. 

In the U.S., equity markets pointed to a steady open. The Dow Jones Industrial Average futures pointed to a 0.04% rise, S&P 500 futures signaled a 0.07% gain, while the Nasdaq 100 futures indicated a 0.05% gain. 

Also Friday, official data showed that German retail sales rose 3.1% in January, beating expectations for a 1% increase, after a 2.1% decline the previous month. 

Later in the day, the euro zone was to release official data on consumer price inflation. 

The U.S. was to release a report from the Institute of Supply Management on manufacturing activity, official data on personal spending and revised data on consumer sentiment from the University of Michigan.

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Forex - EUR/USD edges higher, gains capped by Italy, U.S. concerns

The euro edged higher against the U.S. dollar on Friday, but gains were limited as concerns over the political deadlock in Italy continued to weigh on demand for the single currency and after U.S. budget negotiations failed. 

EUR/USD hit 1.3084 during late Asian trade, the session high; the pair subsequently consolidated at 1.3072, edging up 0.09%. 

The pair was likely to find support at 1.2018, the low of February 26 and resistance at 1.3158, Thursday's high. 

Investors remained cautious amid fears Italy would not be able to continue to implement economic reforms following inconclusive election results. 

Markets were also jittery after U.S. after Republicans and Democrats failed to agree on an alternative deficit-reduction plan, putting the country on the path towards USD85 billion in automatic budget cuts. 

U.S. President Barack Obama invited congressional leaders to the White House for last minute negotiations before the 11.59pm deadline on Friday. 

Earlier in the day, official data showed that German retail sales rose 3.1% in January, beating expectations for a 1% increase, after a 2.1% decline the previous month. 

The euro was also steady against the pound with EUR/GBP inching up 0.03%, to hit 0.8613. 

Also Friday, data showed that China's manufacturing purchasing managers' index declined more-than-expected, ticking down to 50.1 in February from a reading of 50.4 the previous month, albeit remaining in expansion territory for the fourth consecutive month. 

Analysts had expected the index to slip to 50.2. 

Later in the day, the euro zone was to release official data on consumer price inflation, while Spain and Italy were to produce data on manufacturing activity. 

The U.S. was to release a report from the Institute of Supply Management on manufacturing activity, official data on personal spending and revised data on consumer sentiment from the University of Michigan.

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