Investopedia's Forex Outlook For November 2012
AAA
  1. Investopedia's Forex Outlook For November 2012: Macroeconomic Highlights
  2. Investopedia's Forex Outlook For November 2012: Upcoming Events To Watch

Investopedia's Forex Outlook For November 2012: Macroeconomic Highlights

The global economy has continued its slow recovery, but the bullish effects from September are beginning to wear off. The U.S. experienced a slew of positive economic data, but the three-month rally seems to be a bit stalled. Additional uncertainty surrounds the European, Japanese and British economies that all seemed to move sideways in October.

Macroeconomic Highlights
U.S. Investors Shrug Off Recovery
The United States has experienced many signs of a recovery over the past month, with the unemployment rate falling to 7.8% in September and housing starts jumping 2.3% in August to a seasonally adjusted annual rate of 750,000. However, despite this seemingly great news, the S&P 500 has remained roughly even and the U.S. dollar has actually depreciated.

So, why is the market so lethargic?

Capital market investors are likely deterred by a few different things. First, there are many indications that a quick recovery is simply unlikely based on historical trends and these upticks may be simply bumps along the road. Secondly, many investors are taking profits off the table after the run-up between June and September that was driven by stimulus and bond buying.

Forex traders have a number of other reasons to be concerned about the U.S. dollar's health moving forward. Namely, the U.S. Federal Reserve seems set on maintaining an easy money policy for the foreseeable future. In fact, New York Fed President William Dudley suggested in a speech that even a recovery wouldn't necessarily result in any meaningful tightening.

Europe Takes Baby Steps Forward
The European Union may have won the Nobel Peace Prize this year, but investors aren't so concerned that they'll be able to maintain the peace for long. After instituting an unlimited bond buying program last month, the eurozone has managed to tame rising bond yields in troubled countries, but a lack of cohesion still threatens to derail the progress made so far.

The financial markets will be closely watching Spain, in particular, as it has refused to accept any aid from the eurozone's monetary authorities thus far. While officials are reportedly in talks to accept aid in November, the indecision has left Spanish bond yields still near 5.6%, despite a new 2013 budget that the country hoped would assist in lower rates more.

Of course, convincing Spain to accept aid isn't exactly solving a problem entirely. The region still suffers from chronically high unemployment and anemic economic growth, with the exception of Germany, which has fared quite well with the low euro valuation. And investors seem to realize this fact, with U.S. and Swiss bond yields remaining near record lows.

Japan Sees Divided Successes
Japan's economy has struggled over the past few months, with slowing demand in key end markets and the end of recovery-related spending. Recently, the country's government cut its forecast for factory output for a third month in a row, as business moods also appear to be on the decline, according to a survey by the Bank of Japan.

Despite the turmoil in the economy, there seems to be at least one bright spot thanks to the yen's dynamics. A high valuation for the currency has led to an extraordinary number of mergers and acquisitions, including Softbank's $10 billion bid to acquire 70% of Sprint/Nextel. These mergers could add to economic growth over the long-term.

Forex traders will be closely watching the Bank of Japan for any further signs of monetary easing, which would be a logical way to boost its economy. These easing policies could involve additional intervention in the forex market - a scenario certainly worth watching.

Britain's Economy Grows More Uncertain
Britain's economy appears to be improving after jobless claims and consumer spending both showed some signs of improvement. Unemployment in the region fell to a 15-month low during the quarter to August, causing the official unemployment rate to drop to just 7.9% from 8.1% during the quarter to July and the lowest rate since March and May 2011.

Unfortunately, the improvements probably won't be enough to prevent a 0.2% fall in 2012 gross domestic product (GDP) or enough to prevent the government's 95 billion pound deficit target. Worse, it could be just enough to convince the government to forego additional stimulus spending that could provide the boost needed to revive the economy.

Investopedia's Forex Outlook For November 2012: Upcoming Events To Watch

  1. Investopedia's Forex Outlook For November 2012: Macroeconomic Highlights
  2. Investopedia's Forex Outlook For November 2012: Upcoming Events To Watch
RELATED TERMS
  1. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the ...
  2. Eurasian Economic Union (EEU)

    An economic union created in 2014 by a treaty signed by Russia, ...
  3. ICE LIBOR

    See LIBOR
  4. WM/Reuters Benchmark Rates

    Spot and forward foreign exchange rates that are used as standard ...
  5. Marginal Propensity to Save

    The proportion of an aggregate raise in pay that a consumer spends ...
  6. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  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 ...
  2. What are some real-life examples of the 80-20 rule (Pareto Principle) in practice?

    Learn about the origins of the 80-20 rule and understand how it is applied in different areas including business, economics ...
  3. How do wholly owned subsidiaries operate in the European Union?

    Find out how wholly owned subsidiaries and their parent companies are treated in the European Union, specifically regarding ...
  4. How do I calculate production costs in Excel?

    Find out about ways to use Excel to simplify production cost calculation and some sources of good templates and tips for ...

You May Also Like

Related Tutorials
  1. Active Trading Fundamentals

    Introduction to Stock Trader Types

  2. Forex Education

    Investopedia Forex Outlook For February 2013

  3. Forex Fundamentals

    Investopedia's Forex Outlook For January 2013

  4. Forex Fundamentals

    Investopedia's Forex Outlook For December 2012

  5. Forex Fundamentals

    Investopedia's Forex Outlook For October 2012

Trading Center