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. Forex Spot Rate

    The current exchange rate at which a currency pair can be bought ...
  2. Forex Market

    The market in which participants are able to buy, sell, exchange ...
  3. Forex Scalping

    A trading strategy used by forex traders to buy a currency pair ...
  4. Forex Training

    A form of instruction or mentorship that provides information ...
  5. Forex Account

    The type of account a forex trader opens with a retail forex ...
  6. Forex Option Trading

    A security that allows currency traders to realize gains without ...
RELATED FAQS
  1. In the forex market, how is the closing price of a currency pair determined?

    The foreign exchange market, or forex, is the market in which the currencies of the world are traded by governments, banks, ... Read Answer >>
  2. What are the most common market indicators forex traders follow?

    Learn the most common technical indicators that forex traders and currency market analysts utilize to predict likely market ... Read Answer >>
  3. What types of accounts are available for forex trading?

    There are many different types of forex accounts available to the retail forex trader. Demo accounts are offered by forex ... Read Answer >>
  4. How is the value of a pip determined?

    Learn how the pip is used in the pricing of a currency pair in forex trading, and see how the foreign exchange market is ... Read Answer >>
  5. What am I buying and selling in the forex market?

    The forex market is the largest market in the world. According to the Triennial Central Bank Survey conducted by the Bank ... Read Answer >>
  6. Is scalping a viable forex trading strategy?

    Scalping in the forex market involves trading currencies based on a set of real-time analysis. The purpose of scalping is ... Read Answer >>

You May Also Like

Hot Definitions
  1. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  2. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  3. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  4. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  5. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  6. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
Trading Center