Download to read offline
More Related Content
Similar to How Does the US Economy Affect the US Dollar?
More from InvestingTips
How Does the US Economy Affect the US Dollar?
- 1.
- 2. When a Forextrader 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. One of themajor factors is the strength of the US economy.
- 4. How does theUS economy affect the US dollar?
- 5. The US dollarfell in value against other major currencies the other day when US retail sales missed estimates according to NASDAQ.
- 6. The U.S. Dollarwas pressured against a basket of currencies on Monday after a government report showed retail sales data for September missed economists’ expectations.
- 7. A Commerce Departmentreport 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. Other factors inthe 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. Economic Reports That Affectthe US Dollar
- 10. Investopedia explains howeconomic 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. Forex traders whofollow the fundamentals look at 5 reports that affect the dollar.
- 12. A broad rangeof economic reports are useful when conducting research on the dollar.
- 13. Keep in mindthat the actual statistics are often less important than their direction (rising or falling) and their success or failure in meeting pre- release expectations.
- 14. The 5 reportsthey mention are these.
- 15. Trade Balance ◦Trade balance is important because persistent US trade deficits weaken the US dollar.
- 16. Nonfarm Payroll ◦When the economy is generating more jobs, interest rates tend go up and take the dollar up also.
- 17. Gross DomesticProduct ◦ 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. 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. Industrial Production ◦Higher industrial production indicates a stronger economy, likelihood of higher interest rates, and a stronger dollar.
- 20. As one cansee from the explanations, the value of the dollar is somewhat self-correcting.
- 21. When the economystrengthens, exports rise, and people spend more money and inflation takes hold and eats away at the value of the dollar.
- 22. The Federal Reserveraises interest rates and the dollar strengthens until exports weaken and the economy weakens. Then the cycle starts all over again.
- 23.
- 24. The most successfulForex traders are those who accurately predict where the economy is going and therefore whether the dollar will rise or fall over time.
- 25. Short term predictioncan be chancy but longer term there are trends worth considering.
- 26. The Balance offers9 economic predictions for the next decade.
- 27. US EconomicBoom 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. The take-home lessonhere for Forex traders is that over the long term the US dollar will decline based on the huge US debt.
- 29. The offsetting factoris that if the whole world economy goes to pot the dollar will be the best deal of a bad lot.
- 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.