Investopedia's Forex Outlook For January 2013
  1. Investopedia's Forex Outlook For January 2013: Macroeconomic Highlights
  2. Investopedia's Forex Outlook For January 2013: Upcoming Events To Watch

Investopedia's Forex Outlook For January 2013: Macroeconomic Highlights

The global economy largely remains in a holding pattern, as economic recovery for the United States struggles, the European Union remains mired in debt and many emerging markets hold steady. While there is a good chance of additional monetary stimulus in early 2013, these measures have proven to be only a temporary boost in the past, highlighting the fact that long-term solutions are still missing in many troubled parts of the world.

Macroeconomic Highlights
U.S. Treads Water
The financial markets have been largely treading water in the U.S., as concerns about the country's debt, growth rates and unemployment remain. Chronic unemployment has left many consumers and businesses unwilling to increase spending. The result has been a stagnant economy with an inability to lessen its debt burden by increasing its gross domestic product (GDP) growth rates.

Despite these concerns, many commercial entities are significantly more optimistic about the future. December's ISM report showed that factories were more optimistic about 2013, with manufacturing revenue expected to increase 4.6%, although employment was seen as increasing just 0.8% in the critical industry. Meanwhile, BlackRock's Laurence Fink recently pointed out that U.S. corporations remain very strong with about $1.7 trillion in cash.

SEE: Economic Indicators For The Do-It-Yourself Investor

Eurozone Improves, but Troubles Remain
The eurozone crisis has improved throughout December, but the resignation of Italy's Mario Monti has sparked renewed concern. Italian elections in early 2013 could result in a fragmented government majority with limited capacity to pass important reforms. Higher bond yields could then push Spain closer to a funding crisis, as it has been reluctant to accept any funding ahead of a heavy year of debt refinancing in 2013 beginning in January.

While problems among major eurozone players have been flaring up, Greece made significant progress in December in announcing a buyback for its sovereign bonds. The bailout fund financed buyback should clear the way for additional aid from the International Monetary Fund and the European Central Bank. But, the country continues to struggle with a deepening recession driven by harsh austerity measures aimed at cutting spending.

Japan's Economy Contracts, but Bank of Japan Could Intervene
Japan's economy contracted by a greater-than-expected 0.9% during the third quarter, which is deeper than the 0.3% contraction seen during the first quarter, according to revised government data that came out in mid-December. Economists expect these bearish trends to continue into the third quarter, with sluggish exports to China taking a toll on the economy. The shrinking exports have led to a reduced current account surplus due to fewer exports and higher fuel imports.

The adverse economic conditions have also led to speculation that the Bank of Japan will loosen its monetary policy to help spur growth. Many believe that the bank will expand its asset-buying and lending programs, which currently stands at around 91 trillion yen or $1.1 trillion. Sources familiar with the matter told Reuters that it could expand by 5-10 trillion yen, which has already helped Japanese bond yields fall near their nine-and-a-half year lows.

SEE: Lessons Learned: Comparing The Japanese And U.S. Bubbles

Britain's Economy Remains Stagnant Amid Austerity
Britain's economy is expected to contract by 0.1% this quarter, compared with a previous forecast for growth of 0.8%, according to the Office for Budget Responsibility. Meanwhile, the country cut its 2013 growth forecast from 2% to just 1.3%, as it sticks to its austerity program. At the same time, concerns grew that Mr. Osborne's refusal to make about 17 billion pounds per year in additional cuts may lead to the loss of its prized AAA credit rating.

Some traders are concerned that these events could also lead to a triple-dip recession, with a poll from Reuters giving it a one-in-three chance. While the country technically exited its second recession in four years, many traders insist that the rebound was largely due to the London Olympic Games and extra working days that won't be repeated. Further headwinds from the global economy could also pose problems for the troubled economy.

Investopedia's Forex Outlook For January 2013: Upcoming Events To Watch

  1. Investopedia's Forex Outlook For January 2013: Macroeconomic Highlights
  2. Investopedia's Forex Outlook For January 2013: Upcoming Events To Watch
RELATED TERMS
  1. Negative Growth

    A contraction in a country's economy, as evidenced by a decrease ...
  2. Currency Union

    When two or more groups (usually countries) share a common currency ...
  3. Recession

    A significant decline in activity across the economy, lasting ...
  4. Fiscal Policy

    Government spending policies that influence macroeconomic conditions. ...
  5. Economy

    Economy is the large set of inter-related economic production ...
  6. Growth Recession

    An expression coined by economists to describe an economy that ...
RELATED FAQS
  1. In what ways does Bayesian probability support the probability default model when ...

    Learn what happened in the European debt crisis. It became a heated argument between the hawks and doves who argued the merits ... Read Answer >>
  2. Is cyclical unemployment always due to recessions?

    Learn about the mechanisms that cause cyclical unemployment and find out about the role recessions and downturns play in ... Read Answer >>
  3. What developed countries have the greatest exposure to the automotive sector?

    Learn about the developed countries that have the greatest exposure to the automotive sector, Germany and Japan, which have ... Read Answer >>
  4. What austerity measures can a country implement to curtail government spending?

    Read about the types of austerity measures that governments can take to reduce deficits, increase revenue and lower public ... Read Answer >>
  5. Is Japan an emerging market economy?

    Discover whether Japan is an emerging market economy. Emerging markets have high levels of risk and reward due to their growth ... Read Answer >>
  6. How does the long-term outlook of the aerospace sector compare to the broader economy?

    Learn why the aerospace sector is well-positioned for long-term growth, while the global economy remains on uncertain footing ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center