Forex Gump

We’ve seen a trend of positive data lately, as economic reports are showing some improvements. Stock markets are rising globally, up 30% since last March. We are seeing money flow out of the yen and the dollar – and going into commodity currencies!

These are no longer Chinese Whispers, but Chinese jitters resulting from a weakening US dollar. The markets may have been happier if these were Chinese Whispers, which essentially is a distortion of a message, when whispered from ear to ear amongst a chain of people.

All this while, with the focus on recession in the US, Euro area troubles had not received much attention. However, Euro problems seem to have made a big bang appearance with Germany announcing an up to 6% negative growth in its GDP this year on the back of a 3.8% negative real GDP growth in the first quarter of this year.

Credit is the life blood of the American economy. It gives those who previously could not afford fast cars, big houses, and some bling-bling a chance at the American dream. This credit is made possible through consumer loans, mortgages, and credit cards.

From the dollar Libor to housing, signs are that the financial meltdown is beginning to thaw. The efforts put in by the US Fed in lowering interest rates, followed by quantitative easing, seem to have finally led to the money markets easing off.

Retail sales fell 0.4% in April after their 1.3% dip in March, dashing hopes of any foreseeable economic recovery. This sent the stock markets plunging, led by a fall in retail stocks causing investors to turn risk averse again and run to the safety of the dollar.

The US dollar early this week seemed to be on a slippery wicket, when it depreciated against major currencies. The currency depreciated as some improvement in the economic status was projected in terms of US pending home sales and a marginal increase in construction spending.

‘US consumer confidence jumps in April’ – Perceptions, perceptions and perceptions is all that this seems to be about. Just last week the results of the Conference Board index were interpreted to be not so hot, though an indirect reference was made to a likely inflexion point being reached in the recession.

The latest results declared by the Conference Board for its Leading Economic Index for the U.S. provides an insight into the health of the US economy. The index declined 0.3% in March, following a 0.2% decrease in February, and a 0.2% decline in January. But, just what are the Conference Board and its Leading Economic Index?

Opening up trade was considered a mantra for economic growth and prosperity. The developed world and the IMF advocated this for various nations. It was expected to promote investment and exports such that a large number of economies would benefit.