Forex Trading Guide

AP reported that “Obama, a Democrat who is to be sworn in at noon Tuesday as the 44th U.S. president, inherits a $1 trillion-plus deficit and the worst economy since the Great Depression.” But some other sources reported that the accumulated deficit is more than $ 3 trillion.

The Recession
Obama not only inherits a huge deficit but also a financially turmoil country. The recession started in the US in 2007 after the subprime loans debacle and spreads worldwide. It is global now. No country is being spared. It grew into a Global Financial Crisis.

However, “The global economy will recover, but the timing and strength of the recovery are highly uncertain,” Bernanke said in a speech at the London School of Economics.

The Fundamentals
The Economic Fundamentals of US is bad. The manufacturing sector with a drop in Durable Goods Orders, New Housing Sales too dropped and Unemployment on the increase. Interest Rate has been cut several times and it’s almost zero now

The Finance Sector
Banks lost money. Mortgage Companies lost money too. Money lending institutions burst. There is a chain effect in the US financial market and beyond.

Insurance Companies are no exception. Insurance Companies lost money too. AIG problems shocked the world. Now, AIG is selling their assets to get cash.

Brokerage Firms are not spared. In the Stock market the turnover too plunged in tandem with stock prices. Citigroup Inc. and Morgan Stanley agreed to combine their brokerages in a deal that show how much Citigroup wants to slim down and build up cash.

Durable Goods Orders
Manufacturing sector is badly hit. Durable goods orders have declined significantly over the past three months and there is no reason to expect anything different for December or most probably even for January. The November headline durable goods orders posted a 1.5% decline, worst than expected and deteriorating from a 1.0% decline a month earlier.

The excluding transportation durable goods orders increased by 0.6%, albeit lower than the 1.2% recorded previously. Factory orders slumped by 4.6%, compared with a revised 6.0% decline in October. The December non-manufacturing ISM unexpectedly improved to 40.6 from 37.3 a month earlier.

Auto Sales
Auto Sales also dropped. Auto manufacturers are in trouble. But they are lucky. Being a strategic business, auto manufacturers are bailed out.

Quote: “Automakers closed out a dismal 2008 with General Motors Corp. having its worst year in nearly a half-century and both GM and Chrysler LLC having to take emergency loans from the government’s bailout fund.”

New Housing Sales
Housing Sales dived. Pending home sales remained soft, down 4.0% in November versus a revised 4.4% decline a month earlier to 82.3. Foreclosures increased.

It is reported that “President-elect Barack Obama would spend the remaining $350 billion of a financial bailout fund on expanded lending and reduced foreclosures and would not use the money to help other industries, lawmakers said Wednesday after discussions with Obama emissaries.”.

Retail Sales
Retail Sales dropped. Consumers are spending less and less. Consumers either have less money to spend or are saving for the more gloomy forthcoming rainy days. The Commerce Department reported that retail sales dropped 2.7 percent last month, more than double the 1.2 percent decline that Wall Street expected.

Retail sales plunged far more than expected in December, a record sixth straight monthly decline as consumers were battered by a recession, a severe credit crisis and soaring job losses, none of which are likely to ease anytime soon.

Unemployment
Businesses are retrenching sharply and orders are declining across the board. Retrenchment increased. Jobless numbers increased. Government figures showed the U.S. unemployment rate surged in December to 7.2 percent, capping a year in which employers slashed 2.6 million jobs, the most since 1945.

Interest Rate
Interest Rate cuts is the weapon of mass destruction used to combat the recession. In most countries it’s touching zero. It is used as an instrument to climb out of the gutter of recession. Last month, the Fed lowered its federal funds rate to a range of zero to 0.25 percent in its latest effort to reopen frozen credit markets.

“The ECB has reduced the interest rate 1.5 percentage points since the begging of last year, while the Fed cut its target 2.75 percentage points. The Bank of England lowered its main rate 4 full percentage points in 12 months, pushing it to 1.5 percent.” Bloomberg.

Bernanke Optimistic
“The global economy will recover, but the timing and strength of the recovery are highly uncertain,” Bernanke said in a speech at the London School of Economics.

Bernanke said that although there was much uncertainty, he was “hopeful that later in 2009, depending on factors, particularly including financial and credit markets, we should begin to see some stabilization in the economy.”

Bernanke said the US central bank still has “powerful tools” at its disposal to tackle the economic crisis even if its main interest rate has been lowered to near zero, and suggested a recovery is possible by late 2009.

Bernanke commented for the first time on “quantitative easing (QE),” or increasing the money supply in a manner similar to the method used by the Bank of Japan in the 1990s.

Obama will be using the $ 350 billion to reduce unemployment and he expect to create 3 million jobs to eased the alarming unemployment rate. He will also focus on foreclosures and at the same breath spur up the financial sector.

The world is waiting for US to get out the recession as until then there will be more shut downs of manufacturing plants, retrenchments and unemployment worldwide.

Technorati : Durable Goods Order, Fundamental News, Housing Sales, Interest Rate, Mortgage, Retail Sales, Unemployment

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