3.14.2009

Finance Ministers And Central Bankers Are Running Out Of Time To Revive Growth And Sentiment

How long do policy officials have to revive economic growth and stabilize the financial markets? How much worse can conditions become if the global leaders cannot come to a significant, joint policy response to the world’s ills?

• Finance Ministers And Central Bankers Are Running Out Of Time To Revive Growth And Sentiment
• Switzerland Adds Currency Intervention To The List Of Desperate Steps Policy Makers Are Willing To Take
• If GE Loses Its Top Credit Rating, It Won’t Be Long Before Unstable Economies Meet The Same Fate

How long do policy officials have to revive economic growth and stabilize the financial markets? How much worse can conditions become if the global leaders cannot come to a significant, joint policy response to the world’s ills? These are the questions the market is grappling with now; and ‘just how bad can things really become’ may be a question traders have to seriously consider over the coming weeks and months. While the fundamental outlook for general risk trends is not encouraging, carry interest received a significant boost this past week. The Index jumped over 650 points since last Friday, marking a notable break above resistance in the pressure-ridden, falling wedge formation that had taken responsibility for the steady downtrend in carry interest (and thereby sentiment) since the October panic. However, this break is hardly confirmation of a rebound in optimism. The breech relieves the stress on the market to force a major trend; yet the index is still entrapped within long-term congestion. Such sentiment is reflected in the market’s more risk-sensitive asset classes. The Dow has recovered from a 12-year low, Treasuries have pulled back from record highs and the safe-haven US dollar has eased of its own three-year highs. Furthermore, some condition indicators have shown significant improvement: currency market volatility has certainly stabilized; risk reversals show are returning to neutral levels; and yields are starting to return.

It is easy to be comforted by the recovery of such notable indicators and markets; but the broader trends must be taken into account. A week’s rebound in equities and pull back in the US dollar mean little when they are still set within major trends and only arms distance from their respective extremes. Realistically, these are cautionary improvements as the market awaits clear fundamental shifts that signal a tangible recovery in economic activity as well as lender and investor confidence. Over the past few weeks, there have been signs of both improvement and deterioration. Quantitative easing, sizable stimulus packages, government guarantees and efforts to boost reflect a broad array of policy aimed at curbing the worst recession since WWII. However, these efforts have not been universal. Whereas the US and UK have acted quickly and aggressively to their swelling problems; both Japan and the Euro Zone have lagged with their own responses. Without a unified response to this global problem, there is little doubt that conditions will worsen. Recently, the Asian Development Bank has suggested lost asset value could top $50 billion and the World Bank has projected the first global contraction since the 1930’s. Momentum behind this recession is being fed by the slump in investment and consumer spending, which itself is largely based on sentiment. With production and consumption slowing, major corporate bankruptcies becoming more frequent and now whole economies on the verge of default, drastic measures must be taken to prevent what could become a global depression.

Written by John Kicklighter, Currency Strategist
Article Source - Finance Ministers And Central Bankers Are Running Out Of Time To Revive Growth And Sentiment
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What is Forex?

If you would go out on a dinner with your friends or family and you mentioned that you were trading on the Forex market most of them wouldn’t know what you were talking about. The worst thing is that most of the Forex traders that join the Forex market don’t know what they are doing. Understanding what Forex is, is the first good step to your success at Forex trading.


The foreign exchange market (Currency, Forex, or FX) is where currency trading takes place. It is where banks and other official institutions facilitate the buying and selling of foreign currencies. Forex transactions typically involve one party purchasing a quantity of one currency in exchange for paying a quantity of another. The foreign exchange market that we see today started evolving during the 1970s when world over countries gradually switched to floating exchange rate from their erstwhile exchange rate regime, which remained fixed as per the Bretton Woods system till 1971.

Today, the Forex market is one of the largest and most liquid financial markets in the world, and includes trading between large banks, central banks, currency speculators, corporations, governments, and other institutions. The average daily volume in the global foreign exchange and related markets is continuously growing. Traditional daily turnover was reported to be over US$3.2 trillion in April 2007 by the Bank for International Settlements. Since then, the market has continued to grow. According to Euromoney's annual Forex Poll, volumes grew a further 41% between 2007 and 2008.

Forex Turnover

Forex Turnover
Main foreign exchange market turnover, 1988 - 2007, measured in billions of USD.
The purpose of Forex market is to facilitate trade and investment. The need for a foreign exchange market arises because of the presence of multifarious international currencies such as US Dollar, Pound Sterling, Yen, etc., and the need for trading in such currencies. Since you aren’t buying anything physical this kind of trading can be confusing. When buying a currency think of it as buying a part in that particular country’s economy because the currency rate reflects the economical situation of the country when compared to others.

Currencies

Currencies
List of most popular currencies on the Forex market

Forex used to be a closed market because only the “big boys” because you needed between 10 and 50 million $ to open an account. But today, with the development of internet, online Forex brokers have the possibility to offer their services to “little” traders. All you need to start is a computer, fast internet connection and information which you can find on this page also.

This enormous market is like the dangerous sea where you can meet lots of sharks and dangerous waters but at the same time it is the only one where two weeks of trading can hypothetically bring you $1,000,000 out of $1,000 of initial investment.

This is certainly hypothetically because a lot of newbie traders deal with their trades as gambling, that surely bring them to having nothing in the end. You should always keep the phrase "be careful!" in your mind. This market would give you its profit possibilities only if you learn the basic things hard and make lots of demo trading.

The statistics is that as much as 95% of traders come to losing their money at Forex, 5% have profit and less than 1% of traders make large fortune at Forex. You shouldn't produce, sell or advertise anything trading at Forex. Your assets are your knowledge, experience and a small amount of cash.

This market is a platform for banks, transnational corporations and individual traders to change the currencies they possess into other ones. This is the spot Forex market. At this market you can trade with up to 1:400 leverage which means that you'll get $400 on your account for each dollar invested. So, you can trade with the $400,000 sum having invested $1,000 onto your account.

Forex is unique among other world markets because in any time of day and night, somewhere in the world, a financial centre is open for business, banks and corporations exchange currency all the time, with a little lower frequency during the weekend.

Why to trade on Forex?

1. There is no commission fee for trading at Forex.
2. There is no intermediary, you can trade directly at Forex.
3. Forex is open 24-hours a day.
4. Nobody can influence the market for a longer period.
5. High liquidity.
6. Free demo accounts, analysis and charts.
7. Small accounts that allow everyone to try out his luck.

Hope this has answered a lot of questions you were asking yourself about Forex and that you can now start trading. Also make sure that you check out other articles on this blog which can help you earn your fortune.

Good luck to everyone!