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Thursday, December 6, 2012

Economic factors and the currency market: A brief December outline

By Penne Munroe

With under a month left of the year, forex traders are looking to see on what note 2012 will end. With regards to currency trading, various economic factors that have been prevalent throughout the year will continue to move the currency market, and no sudden recovery from the economic slump is expected by the end of the year. However, by examining macroeconomic factors it’s possible to note some improvement in certain economies. This article offers a brief outline of the economic factors that are contributing to the fluctuations in the currency market this December.

Post election uncertainty in the United States

Generally an economy stabilises after an election, however the United States remains uncertain. With President Barack Obama’s second term election comes tough opposition from the Republicans, which could push the economy towards strong fiscal policies. However, a resolution on this matter is expected before any measures are put in place. An unexpected economic factor was Hurricane Sandy, which contributed to the unemployment rate due to factories closing. According to Reuters, the country is expected to grow by 1.6 percent in this last quarter.

The Eurozone crisis continues

One of the largest macroeconomic factors at play is the continuing Eurozone crisis. The unlimited Bond Buying Scheme that was announced by the European Central Bank (ECB) earlier this year may have contributed to a slight recovery, however political leaders are yet to come up with a convincing and sustainable solution to drive Europe out of its sovereign debt crisis. Economic factors that are hampering development include the lack of agreement with regards to Greece’s next bailout and Spain’s refusal to accept a bailout.

Economic factors affecting business include the record EU unemployment rate of 11.6% in September. With regards to Britain, investors would like to see more momentum, although its recovery path has shown stable signs of improvement. The macroeconomic factors at play here include the Bank of England’s (BOE) £375 billion purchase of UK government bonds, which helped to inflate the economy.

Asia economic growth is divided

Asia is becoming increasingly divided into regions that are performing well and growing and those that are faltering. Japan is the prime example of the latter group, and sank into recession in the third quarter, pushing the Bank of Japan (BOJ) to further its powerful monetary easing. A major economic factor, China is enjoying accelerated growth again after a brief slow down, which is expected to continue into next year.

About the author: Penny Munroe is an avid writer in finance related news and tips. Articles include selecting the best Forex trading platforms to the latest economic news.