FOREXYARD: Forex News Blog

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Economic Recovery on the Way, but Slowly Posted: 18 Jun 2009 08:31 AM PDT Looking over the forex markets today, following the opening bell in the US, my attention was brought to a few important indications which may generate some optimism for traders in the coming days. First and foremost were two reports from the US which demonstrated that economic recovery is on the way, albeit slowly. One such report was the Philly Fed Manufacturing Index which highlighted a growing trend among similar indices: primarily that the market is still going negative, but slower and slower, and may be bottoming-out soon. Boosting this notion was the CB Leading Index which grew by 1.2% in May, more than forecasters had anticipated. Another positive indication was an increase in the amount of public borrowing taking place in Britain, showing that many consumers are willing to take on more risk and debt with an expectation of recovery in the nearest future. On the other side of the globe, Canada showed a modest increase in inflationary data suggesting that economic growth is right around the corner. The US also released an unemployment report which came in-line with market expectations and puts employment, as mentioned earlier, continuing downward, but much slower than before. What does this mean for the average forex trader? In general it means that economic indicators are likely to begin having a more predictable correlation with the value of their respective currencies. Global economic growth and recovery will be much slower than many would like, but safety measures are being put in place (the US’s recent plan to oversee large companies and protect consumers, for example) in order to ensure that such an uncontrollable downward spiral doesn’t occur again. This means volatility will be generated in the coming weeks as currencies search for their true value, and that market movements in general may become more pronounced and predictable.

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