1. Investopedia's September 2012 Forex Outlook - Introduction
  2. Investopedia's September 2012 Forex Outlook - Macroeconomic Highlights
  3. Investopedia's Forex Outlook For September 2012 - Upcoming Events To Watch

U.S. Continues Its Slow, Jobless Recovery
The U.S. economy showed signs of improvement during August, but the recovery is progressing more slowly than many economists and investors had hoped. The slower-than-usual growth is due largely to stubborn unemployment, but gains in corporate profit have helped offset some of that slowdown, particularly by boosting the stock market over the past few months.

Employment figures showed an uptick, but remain below the levels needed for sustainable net job growth. In early July, the U.S. generated a better-than-expected 163,000 jobs, led by unexpected gains in the manufacturing and business services sectors. However, the official unemployment rate hit 8.3%, up from an 8.2% reading during the previous month, as the U.S. population expanded.

Despite the stagnant employment situation, some leading indicators showed promising signs of improvement. Consumer sentiment edged up to a better-than-expected 73.6, which could indicate that consumers are ready to spend more. Moreover, a composite index of ten economic leading indicators showed a 0.4% improvement, compared to a 0.3% contraction in July. But still, the Federal Reserve is far from opposed to using additional easing to help the economy.

SEE: 7 Ways To Position Yourself For Recovery

European Yields Fall, but Uncertainty Remains
Caterpillar Inc. CEO Doug Oberhelman perhaps said it best when he noted in mid-August that the global economic outlook is more uncertain now than it was in late 2008 due to the politics involved in the eurozone crisis. Despite numerous efforts to devise a unified policy, the region has fallen short of a comprehensive package that would effectively calm the financial markets.

While the euro has been edging higher throughout the month, many economists question the eurozone's resolve in implementing necessary structural reforms. Moody's, one of the three largest ratings agencies in the world noted, "the correction [in the eurozone] is at best only halfway complete, depending on the country in question, and could take several years."

Bond yields have also improved throughout the region, after speculation arose that the ECB was exploring the idea of a cap on government bond yields. Spanish bond yields fell to 6.22% by mid-August, while Italian and Irish bond yields also moved sharply lower. The expectation of bond buying had also halved the yields on two-year Spanish bonds since July.

SEE: How Eurozone Debt Benefits Americans

Japan's Economy Shows Signs of Slowing
Japan had been a relatively safe bet for investors, after reporting several quarters of robust growth, driven by reconstruction spending. However, the growth proved difficult to maintain, as the country's second-quarter GDP fell to an annualized 1.4% compared to economist forecasts of around 2.3% and a 5.5% annualized reading during the first quarter.

The Bank of Japan now forecasts a 2.2% expansion in GDP this business year and a 1.7% increase in the fiscal year beginning April 2013. Economics Minister Motohisa Furukawa noted that the country's economy continues to recover, but is feeling the effects of the European debt crisis and slowing overseas growth, adding that the government will consider its options.

Britain Stays the Course for Now
Britain remains in a precarious situation after experiencing the deepest recession since the 1920s and the slowest recovery and budget deficit on record. While the bond markets haven't lost faith in the country and deflation remains under control, there's concern with escalating problems in the eurozone and a lack of confidence in George Osborne's policies.

During its last meeting, the Bank of England opted to keep interest rates at a record low and keep its quantitative easing cash stimulus program set at $584 billion. Rising inflation and negative GDP output could force the central bank to increase its QE program by 50 billion pounds, according to some economists, which could pressure the pound.

SEE: The Importance Of Inflation And GDP

Investopedia's Forex Outlook For September 2012 - Upcoming Events To Watch

Related Articles
  1. Investing

    Investing in an Age of Low Interest Rates

    These are the effects of low interest rates and Treasury yields on your investments and financial future.
  2. Insights

    Macroeconomic Forces That Will Control Markets in 2016

    Learn why several basic macroeconomic factors will control the direction of stock and bond markets in 2016.
  3. Financial Advisor

    Why is the Bond Market So Risky?

    Investors who wish to buy bonds need to understand the risks they face in the market for the foreseeable future.
  4. Investing

    Why Spain's Sovereign Debt Is Outshining Italy's

    Spanish 10-year government bonds have been trading at a lower yield than Italy, which has significantly larger economy
  5. Insights

    Why the Stock Market Isn't Affected by Slow GDP Growth

    Learn how the stock market reached new levels in the years following the financial crisis, even though U.S. economic conditions were consistently weak.
  6. Investing

    Bonds May Have Become Much Riskier for Investors

    Central bank policies of QE, negative interest rates and aggressive open market buying may have turned bonds, once a haven, into risky assets
  7. Investing

    4 Consequences of Draghi's Negative Rate Policy

    What has been the effect of negative interest rates on Europe's economy so far? Here are a few pros and cons.
  8. Insights

    How Negative Interest Rates Can Affect Bond Prices

    Interest rates have gone negative in Europe, and bond yields are following suit. Here's why investors still buy them.
  9. Investing

    The Negative Rates of Europe's Central Banks

    We are currently seeing negative central bank deposit rates and government and corporate bonds with negative yields, but there are investors buying into these securities. Why?
  10. Investing

    Which Countries Will Drive Global Growth in 2016?

    Given the volatility that has already shaken the global economy, the world's largest economies will be leaned on to stimulate growth in 2016
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center