Janet Yellen’s voice might be softer than her predecessor’s but she carries a big stick and pres5rnnted a pro dollar stance in her first press conference that caught equity markets by surprise and lifted the dollar against all major currencies. The new Fed Chair dissected a few of Bernanke’s milestones and added some new criteria for analysts and the public to consider as indicators of Fed policy in the future.

Combined with some easing in the Ukraine, the stronger dollar fared well against the euro, the GBP and yen and soared against the weaker CAD. Easing of the Ukrainian crisis is based on statements by Russia’s Putin that he would contain his invasion to Crimea even as Russian soldiers stormed Crimean outposts.

Tough talk at the UN and from US Secretary of State John Kerry to the US Congress, and from Germany’s Chancellor Angela Merkel sent uneasy tremors through global equity markets and turned Forex investors toward the yen and Swiss Franc on Thursday. Russia continued its defiant, self-serving double talk as a Sunday referendum in the Ukraine drew near.

On Tuesday, major equity markets rallied while currencies appeared distracted by Russia’s invasion of Ukraine but Wednesday showed signs of tenuous stability. Economic factors began to take hold in early morning trading as soft economic news from the European Union weighed on the global economy.

In Russia, equity markets mounted a mild rally on Tuesday only to turn down on Wednesday. After striking a new low against the USD on Monday, the Russian rouble posted modest, fragile gains against the dollar on Wednesday.

Russian Rouble Down 9 Percent vs. USD in 2014

If you are an individual Forex investor, your success will depend upon your ability to read how giant Forex traders will interpret a host of factors that affect the demand for a specific currency compared to the demand for another currency. Forex investors can profit by being on either side of the bet. If the investor senses the currency value will appreciate or deprecate against another currency in a specific time frame, there is money to be made.

Experienced traders deploy strategies to hedge their bets, but for today we will consider the key economic, financial and political indicators that traders use to evaluate the relative strength or weakness of a currency opposed to a paired partner.

US exports have played an unexpectedly strong part in the escape from the worst recession in history. Made in the USA is alive and well in international markets and businesses large and small are reaping big rewards.

From international juggernauts like Boeing and General Electric to Mom & Pop beauty product manufacturers like Dana Point-based Envyderm, recipient of a seven-year $84 million export contract with a Middle East pharmacy chain, export is lifting US manufacturers and rewarding innovative entrepreneurs. The exploits of America’s biggest corporations are well publicized but small businesses that have a tough time competing for retail space in the US are turning to overseas buyers.

Emerging markets have borne the weight of punitive flight strategies as investors ahead of the game shift away from core euro zone bonds to euro zone periphery countries that struggled mightily at the outset of the recession. Yields from Italy, Ireland and especially Spain have gained favor with many fund managers admitting they are overweight in these areas.

And, why not? A negative report from the Markit’s Composite Purchasing Managers’ Index, that includes data from thousands of businesses, turned sour in February, falling to 52.7, 0.2 points below January’s 31-month high. Analysts had expected a jump to 53.1.

As New York and the rest of the northeast prepared for another wintry assault, markets appreciated the strain on the economy and seemed sympathetic to soft data from the employment and consumer spending sectors. Initial claims for unemployment climbed last week as retail sales trended lower in January in the face of reduced December figures.

Analysts and investors found other reasons to support equities. Many expect that solid data will not be available until at least April. There was investor support for Janet Yellen’s first appearance on The Hill as the new Fed chief indicated continuance of support for the economy.

Weather took the blame for a second consecutive non-farm payroll report as equity investors blinked but quickly recovered leaving the dollar and bond market to shoulder the load on Friday. With projections for about 185,000 new jobs in January, the Labor Department’s final report January card was a dismal 113,000 new jobs gained. Compiled with the disappointing 74,000 net gain in December, the under-200,000 two-month report was initially interpreted as softness in the economy.

However, a strong US consumer credit report turned the market around as investors realized the powerful American consumer seems undeterred. The Federal Reserve announced that total consumer credit in December rose $18.8 billion to $3.1 trillion, the biggest gain since February 2013.  

Better than expected news from the US Labor Department was offset by disappointing news from the Commerce Department sending equity markets higher as the dollar lost ground against major currencies. The European Central Bank (ECB) and the Bank of England (BOE) held firm on record low interest rates sending equity markets in the region upwards.

In Washington, The Labor Department reported that initial claims for state unemployment benefits dropped by 20,000 to a seasonally adjusted 331,00, below the projected 335,000. Analysts anxiously await Friday’s non-farm payroll report. Early projections indicate gains of 175,000 job after December’s disastrous 74,000 new jobs. A disappointing number could send tremors through equities and weaken the dollar while a favorable number a could lift both arenas.

Renewed inflation concerns and undeniable unemployment pressure pushed the euro below the $1.35 USD mark and to a two-month low against the yen. Consumer price inflation fell back to 0.7 percent, a rate hit last October, and below December’s 0.8 rate. The rate is well below the ECB’s target of 2.0 percent and may necessitate tightening by the central bank as early as next week.

In the euro zone, the cost of food, alcohol and tobacco has increased by 1.7 percent in 2014 but is more than offset by significant cost reductions in energy prices, down 1.2 percent. Europe’s biggest economy, Germany, saw consumer prices decline by 0.7 percent in January.