Archive for October, 2013

The Chancellor’s recent encouraging news on growth in the British economy has strengthened sterling against most other currencies. Online forex traders should be careful, however, as the effect is unlikely to be permanent.

The UK growth figure for the quarter June – September 2013 was 0.8 per cent, which was an increase on the two previous quarters, and also higher than the expectations of the International Monetary Fund, whose chief economist had described George Osborne’s fiscal policies as ‘playing with fire’. It was better also than the predictions of the Chancellor’s own fiscal watch dog, the Office for Budget Responsibility, which in March predicted an annual growth rate of 0.6 per cent.
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One of the aspects that has recently dominated the Forex markets is the continued slide of the United States dollar in relation to currencies such as the Euro and the Pound. While much of this bearish momentum has been triggered by the brinksmanship recently played out regarding the debt ceiling, recent data has been just as damaging.

The primary reason for a negative short-term outlook was prompted by the recent non-farm payroll report submitted that displayed dismal job growth figures within the United States. In turn, this has caused online Forex investors to take a rather cautious approach to the outlook for the greenback.
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The Confederation of British Industry’s most recent quarterly survey, covering the three months to the start of September, puts British business confidence at its highest for nearly seventeen years.

The consequences for forex trading are likely to be an increase in confidence in the pound and a strengthening of its value against the US dollar, which has already been weakened by the US government shutdown.
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As the US government shutdown moves into its third day, inevitably the crisis continues to have a negative impact on the strength of the US dollar.

Many other currencies had already started to strengthen against the dollar by the end of September, in anticipation of the Republican-led House of Representatives vote to refuse acceptance of the budget. However, the continuing failure of the American political parties to negotiate a settlement is likely to weaken confidence in the dollar further as the days go by, which will impact on forex trading in a number of currencies.
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