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How Does the US Economy Affect the US Dollar?

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http://www.forexconspiracyreport.com/how-does-the-us-economy-affect-the-us-dollar/

How Does the US Economy Affect the US Dollar?

When a Forex trader looks to the future in trading the US dollar, he or she watches for the factors that drive the currency higher and lower against others. One of the major factors is the strength of the US economy. How does the US economy affect the US dollar? The US dollar fell in value against other major currencies the other day when US retail sales missed estimates according to NASDAQ.

The U.S. Dollar was pressured against a basket of currencies on Monday after a government report showed retail sales data for September missed economists’ expectations.

A Commerce Department report on Monday showed that U.S. retail sales barely rose in September as a rebound in motor vehicle purchases was offset by the biggest drop in spending at restaurants and bars in nearly two years.

Other factors in the dollar’s decline were the prospect of trouble with Saudi Arabia in regard to the murder of Saudi reporter by Saudi security people and tightening of US Treasury yields.

Economic Reports That Affect the US Dollar

Investopedia explains how economic factors in an expansion can cause inflation which in turn weakens the dollar and how an economic contraction can cause deflation which makes the dollar more valuable. Forex traders who follow the fundamentals look at 5 reports that affect the dollar.

A broad range of economic reports are useful when conducting research on the dollar.

Keep in mind that the actual statistics are often less important than their direction (rising or falling) and their success or failure in meeting pre-release expectations.

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How Does the US Economy Affect the US Dollar?

  1. 1. By www.ForexConspiracyReport.com
  2. 2. When a Forex trader looks to the future in trading the US dollar, he or she watches for the factors that drive the currency higher and lower against others.
  3. 3. One of the major factors is the strength of the US economy.
  4. 4. How does the US economy affect the US dollar?
  5. 5. The US dollar fell in value against other major currencies the other day when US retail sales missed estimates according to NASDAQ.
  6. 6. The U.S. Dollar was pressured against a basket of currencies on Monday after a government report showed retail sales data for September missed economists’ expectations.
  7. 7. A Commerce Department report on Monday showed that U.S. retail sales barely rose in September as a rebound in motor vehicle purchases was offset by the biggest drop in spending at restaurants and bars in nearly two years.
  8. 8. Other factors in the dollar’s decline were the prospect of trouble with Saudi Arabia in regard to the murder of Saudi reporter by Saudi security people and tightening of US Treasury yields.
  9. 9. Economic Reports That Affect the US Dollar
  10. 10. Investopedia explains how economic factors in an expansion can cause inflation which in turn weakens the dollar and how an economic contraction can cause deflation which makes the dollar more valuable.
  11. 11. Forex traders who follow the fundamentals look at 5 reports that affect the dollar.
  12. 12. A broad range of economic reports are useful when conducting research on the dollar.
  13. 13. Keep in mind that the actual statistics are often less important than their direction (rising or falling) and their success or failure in meeting pre- release expectations.
  14. 14. The 5 reports they mention are these.
  15. 15.  Trade Balance ◦ Trade balance is important because persistent US trade deficits weaken the US dollar.
  16. 16.  Nonfarm Payroll ◦ When the economy is generating more jobs, interest rates tend go up and take the dollar up also.
  17. 17.  Gross Domestic Product ◦ GDP is a measure of the US economy and like employment is a good predictor of interest rates and the rise and fall of the dollar
  18. 18.  Retail Sales ◦ Strong sales indicate a strong economy and help support a strong economy as people are spending money. This indicator also tells us if interest rates and the dollar are likely to go up.
  19. 19.  Industrial Production ◦ Higher industrial production indicates a stronger economy, likelihood of higher interest rates, and a stronger dollar.
  20. 20. As one can see from the explanations, the value of the dollar is somewhat self-correcting.
  21. 21. When the economy strengthens, exports rise, and people spend more money and inflation takes hold and eats away at the value of the dollar.
  22. 22. The Federal Reserve raises interest rates and the dollar strengthens until exports weaken and the economy weakens. Then the cycle starts all over again.
  23. 23. Anticipating the Economy
  24. 24. The most successful Forex traders are those who accurately predict where the economy is going and therefore whether the dollar will rise or fall over time.
  25. 25. Short term prediction can be chancy but longer term there are trends worth considering.
  26. 26. The Balance offers 9 economic predictions for the next decade.
  27. 27.  US Economic Boom and Bust  Rising US Healthcare Costs  Steadily Increasing US Debt  China Will Become Stronger  US Dollar Will Resume Its Long Term Decline  Oil and Natural Gas Prices Will Rise  The Fed Will Manage to Control Inflation  US Housing Market Will Continue to Grow  USA Will Not Involve Itself in Any More Ground Wars
  28. 28. The take-home lesson here for Forex traders is that over the long term the US dollar will decline based on the huge US debt.
  29. 29. The offsetting factor is that if the whole world economy goes to pot the dollar will be the best deal of a bad lot.
  30. 30. The other “lesson” is that China has problems with debt too and there can be only so much growth of their manufacturing base before they run out of folks to sell to.

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