Next Forex Conspiracy

http://www.forexconspiracyreport.com/next-forex-conspiracy/ Next Forex Conspiracy By www.ForexConspiracyReport.com Nations pursue monetary policies that benefit their own economies. Sometimes these monetary policies are clean and sometimes like today they amount to conspiracies to win the competitive devaluation contest. Is this the next Forex conspiracy? The global economy is weak and nations are using currency exchange rates as the next Forex conspiracy. Reuters reports the story. The massive monetary stimulus programs deployed by advanced economies are producing fierce foreign exchange swings and fuelling talk of a currency war. The euro hit a 12-year low below $1.05 against the dollar at the start of last week only to jump back to $1.10 on Wednesday - its biggest one-day rise in six years - after the Fed signaled it was in no hurry to raise rates after all. The Chinese yuan reversed a long declining trend to post its strongest weekly rise against the dollar since 2007 due to a rush of dollar sales by major state-owned banks. Bank of Japan Governor Haruhiko Kuroda dismissed talk of competitive devaluations to spur economic growth, saying on Friday that the Fed, the BOJ and the European Central Bank had all printed money "to achieve their price stability targets, not to depreciate their currencies." Currency war or not, as long as foreign exchange movements remain so sharp, crucially determining the outlook for growth and inflation, currencies will remain uppermost in policymakers' minds. The basic of these competitive currency devaluations is to improve a nation’s economy. Each nation prints money to stimulate the economy, create jobs and decrease the value of the nation’s currency. A weaker currency makes their exports cheaper and more competitive in global markets. The concern generally voiced about this next Forex conspiracy is that it will lead to global deflation. Deflation Investopedia defines deflation: A general decline in prices, often caused by a reduction in the supply of money or credit. Deflation can be caused also by a decrease in government, personal or investment spending. The opposite of inflation, deflation has the side effect of increased unemployment since there is a lower level of demand in the economy, which can lead to an economic depression. Central banks attempt to stop severe deflation, along with severe inflation, in an attempt to keep the excessive drop in prices to a minimum. The concern with deflation is that it leads to a downward spiral of lowering profits, closing factories, lower incomes and fewer jobs. Homeowners find that the cost of their mortgages become too great as the cost of money rises. Fed Response to the Next Forex Conspiracy The US Federal Reserve may have started things going with its quantitative easing program that brought the USA out of the recession. Europe followed the austerity route and is threatening again with recession. Thus the European Central Bank is now looking to use their own quantitative easing program to rescue the EU economy. The Fed has been waiting to raise interest rates. Now, according to the Wall Street Journal, the Fed will wait until September to avoid raising the price of the dollar any more against other major currencies that are being driven downward by the next Forex conspiracy. The Federal Reserve will likely start raising short-term interest rates in September, according to most private economists polled in recent days by The Wall Street Journal–a significant shift away from earlier predictions of liftoff in June. Some 65% of the economists in the latest survey expected a September rate increase, while just 18% saw the first move coming in June. Just a month earlier, economists were more evenly split, with 48% predicting a first rate rise in June while 38% expected it in September. The latest survey was conducted Friday through Tuesday; 60 analysts offered predictions for the timing of the central bank’s initial rate increase. In the meantime Forex traders will cope with the next Forex conspiracy in attempting to predict the paths of major currencies in the months ahead. http://youtu.be/iVlSHnnySmc