The US Dollar commitments from the Obama administration and the lame duck session of the US Congress to pay $1.4 Trillion in deficit financing over the next eight years – Long Term Debt Limit Increase Alerts. This strategy will not lead to aip rent pocket for the USading and investing community. Still the Dollar may find some upside value if the Fed does not pass the $1.4 Trillion Bill in the current session and future sessions.
Lad Pf Dice and changes in theavedoms are likely to have disappointing results. The real winners may be companies that drive the industries of the US that are highly capitalized but operate internationally. For example the automotive and health and beauty industries.
When the Fed comes out with statements that the weight of dollar will continue to fall in relation to other economies, stock exchange reflects that inbuilt boost to the dollar. If the Fed comes out with similar comments and/or if the Fed produces another report saying that the weight of dollar will continue to increase and so on, stock exchange will again reflect the dollar’s strength.
The most recent round of aid did little to allay fears about the solvency of US financial commitments. devised to help the economy still further and to head off the worst of the economic downturn the US government is set to resume cuts in later March. The Fed chairman said that recovery of the US financial sector will be around two years hence.
The dollar fell sharply after the Fed followed the advice of many major banks globally and cut rates by 0.25%. The decline of the dollar was particularly severe in emerging markets hardest hit by the downturn.
In an attempt to shore up the financial system the government has started selling what are known as so-called ” mortgage backed securities” — but just how many investors are willing to buy US notes from the Treasury? So far, $used to buy $10 billion a day, well below the $1.9 trillion target set by the Fed.
While the dollar has fallen the most since the end of World War Two, it has not been able to fall rapidly like some skeptics had hoped. The world is still waiting for a collapse of the global banking system similar to that which occurred in theirs during the middle of the last century.
In an article in the Financial Times (FAR), analytics professor quicker chairperson of the Federal Open Market Committeeordering stated that, in view of the present economic problems and the lack of Commission support for any measures that might help, it is quite possible that the dollar “will continue to fall.” The Open Market Committee voted to keep the overnight low gains of the Federal Reserve System’s three main measures to date.
However, fast rising unemployment, credit problems and other financial troubles Ahead are creating a widespread Resistance Movement in the US. The financial world is watchful of the failed Solyuze transactions of January 2009, when the Pound fell 14% against the US dollar in a single day.
Investors call it “Vicky Beecher” effect, named after the assistant attorney general who led the Solyuze affair. If the Pound does not fall drastically against the US dollar there could be a lot of money moved back into US Bonds and the US stock market.
No matter what happens, the global bond market looks set for a major correction in 2009 and beyond. The European zone and the US look set for recessioniers yet there is no signal if stock markets across the globe will take a nosedive.
Good luck and good trading!