http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
Worldwide Economic Contraction
According to Reuters weak US data are convincing traders that the US Federal Reserve is going to delay its interest rate increase. In addition retail sales are down and the general business conditions index fell dramatically.
The U.S. dollar hit a three-week low against the euro and a more than one-month low against the yen on Wednesday after weak U.S. economic data heightened concerns that the Federal Reserve would delay its first interest rate hike.
Commerce Department data showed U.S. retail sales dropped 0.3 percent in September, while the Labor Department said prices received by U.S. producers fell 0.1 percent in September, the first decline in more than a year.
In addition, the New York Fed’s Empire State general business conditions index plunged to 6.17 in October from September’s 27.54, marking the weakest pace of manufacturing activity in New York state since April.
Higher interest rates drive up the relative value of a currency and lower interest rates drive the currency down. A weaker economy drives a currency down as well. The dollar has fallen against the Yen. However, things are not so good in other nations either. Our read is that there is a strong risk of a worldwide economic contraction starting with a recession in Europe and an economic slowdown in China.
Euro Worries
The Globe and Mail notes a Fear of new euro crisis and expounds on the continuing debt problems in Greece.
Just when you thought it was safe to go back in the Acropolis For a continent already in despair, fresh woes in Greece couldn’t come at a worse possible time. Greece, the poster child of the euro crisis, is in deep, deep trouble again. And a big question today is how that could affect its already-suffering neighbors and, indeed, the world. The troubles have investors worried about a replay of the debt crisis that plagued the euro zone, which, of course, is a much broader area of concern given a stalled economy, high unemployment and the very real threat of deflation.
The Greek debt crisis was part of the original near melt down of the EU and issues of solvency and lender trust continue. The threat of a Eurozone breakup is coupled with the threat of a worldwide economic contraction.
And China
Despite and economic slowdown China has been able to support the Yuan and in fact the currency has gone up recently. This, according to Bloomberg, is because reserves make winners.
While all emerging-Asia exchange rates will weaken through mid-2015, China’s yuan and Taiwan’s dollar will post the smallest declines of about 1 percent each, according to ABN Amro Bank NV. The Dutch bank says the currencies will find support because China has the world’s biggest foreign reserves at $3.99 trillion, and Taiwan’s $421 billion are the fifth-largest.
2. According to Reuters weak US
data are convincing traders that the
US Federal Reserve is going to delay
its interest rate increase.
http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
3. In addition retail sales are down and
the general business conditions index
fell dramatically.
http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
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http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
5. The U.S. dollar hit a three-week low
against the euro and a more than
one-month low against the yen on
Wednesday after weak U.S.
economic data heightened concerns
that the Federal Reserve would delay
its first interest rate hike.
http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
6. Commerce Department data showed
U.S. retail sales dropped 0.3 percent
in September, while the Labor
Department said prices received by
U.S. producers fell 0.1 percent in
September, the first decline in more
than a year.
http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
7. In addition, the New York Fed’s
Empire State general business
conditions index plunged to 6.17 in
October from September’s 27.54,
marking the weakest pace of
manufacturing activity in New York
state since April.
http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
8. Higher interest rates drive up the
relative value of a currency and lower
interest rates drive the currency
down.
http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
9. A weaker economy drives a currency
down as well. The dollar has fallen
against the Yen.
http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
10. However, things are not so good in
other nations either.
http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
11. Our read is that there is a strong risk
of a worldwide economic contraction
starting with a recession in Europe
and an economic slowdown in China.
http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
13. The Globe and Mail notes a Fear of
new euro crisis and expounds on
the continuing debt problems in
Greece.
http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
14. Just when you thought it was safe to
go back in the Acropolis For a
continent already in despair, fresh
woes in Greece couldn’t come at a
worse possible time.
http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
15. Greece, the poster child of the euro
crisis, is in deep, deep trouble again.
http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
16. And a big question today is how that
could affect its already-suffering
neighbors and, indeed, the world.
http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
17. The troubles have investors worried
about a replay of the debt crisis that
plagued the euro zone, which, of
course, is a much broader area of
concern given a stalled economy,
high unemployment and the very real
threat of deflation.
http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
18. The Greek debt crisis was part of the
original near melt down of the EU and
issues of solvency and lender trust
continue.
http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
19. The threat of a Eurozone breakup is
coupled with the threat of a worldwide
economic contraction.
http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
21. Despite and economic slowdown
China has been able to support the
Yuan and in fact the currency has
gone up recently.
http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
22. This, according to Bloomberg, is
because reserves make winners.
http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
23. While all emerging-Asia exchange
rates will weaken through mid-2015,
China’s yuan and Taiwan’s dollar will
post the smallest declines of about 1
percent each, according to ABN Amro
Bank NV.
http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
24. The Dutch bank says the currencies
will find support because China has
the world’s biggest foreign reserves
at $3.99 trillion, and Taiwan’s $421
billion are the fifth-largest.
http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
25. The nations that have built but up
currency reserves will be able to
preserve currency strength despite a
global economic contraction.
http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
26. China may be able to avoid an
economic meltdown because it can
spend its currency reserves on
internal projects and keep people
working even as a recession reduces
demand for Chinese products from
the EU.
http://www.theforexnittygritty.com/forex/worldwide-economic-contraction
