User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Thursday May 13, 2004 - 22:01:30 GMT
Foreign Exchange Analytics -

Share This Story:
| | Email

Cyclical Story Dominates Structural Story On Dollar

Cyclical Story Dominates Structural Story On Dollar

Wednesday's record US trade deficit for March did impact the dollar as the market switched focus away from the cyclical story that had been supporting the dollar (higher Fed funds rate) since early April to the structural story (funding the US current account imbalance) that drove the dollar for some if not much of the two-year decline through February. Well it switched the focus briefly. The focus today, if prices tell us anything, switched back to the cyclical story or the impending Fed rate hike (US economy growing at a faster relative rate than the rest of the world).

It is reasonable to expect the cyclical story to remain the dominant theme for the FX market for the near-term anyway. The Fed has yet to start raising rates. US GDP ran at its highest on an SAAR basis for the last three quarters ending Q1 than it has at any other comparable time in two decades. And there is no indication yet that Q2 will be considerably slower. Furthermore the pace of growth remains largely independent of global demand as domestic demand is buoyant.

On the contrary, growth in Europe is considerably less impressive barely growing at all in 2003 and only in Q1 starting to show some acceleration. Italy, German and France GDP in Q1 all surprised to the upside and Euro Zone Q1 GDP out Friday is expected to show 0.5% q/q gain (close to 3% SAAR). But Euro Zone growth is largely export dependent as domestic activity remains sluggish at best in Germany, Italy and France and hence vulnerable to currency swings and foreign growth rates. While the euro is well off the highs of January and February, it is still strong. Oil prices are rising and staying high and are a brake on demand in the short-run...inflationary over time. This is surely not the environment for higher ECB rates. Okay a rate cut is no longer in the cards as we argued a few weeks back, but this central bank will be lucky if it can follow a third Fed rate hike with its first rate hike before all is said and done. So with cyclical story dominant the euro should fall and the dollar is and it will continue (1.10-1.12 target band) before the structural story has a chance of returning to the forefront.

And Japan is working through a false sense of recovery. Markets arguably got ahead of the economy through March. But recent data on capex and household spending suggest the excitement over domestic demand was premature. A few months does not a trend make. Indeed the price action in the yen and Nikkei say something about the recovery more along the lines of one step forward two steps back. Investors are fleeing Japan assets (stocks) and selling the currency. Japanese institutional investors are also buying foreign securities (have been since April), even with higher nominal rates in JGB's. Upcoming Q1 GDP for Japan is expected to be 3.5% SAAR, which is not shabby), but it will largely reflect net exports. The more diversified Japanese economy has yet to arrive. Moreover, with China stepping on the brakes, Japanese exports into Asia are at risk. And while the cyclical story dominates it is reasonable to look for dollar/yen to rise to the 118-120 area.

When does the structural story come back to haunt the dollar with staying power? Well Fed tightening alone is rarely sufficient to drive long-term dollar rally. Indeed the market may get to pricing in Fed rate cuts for the next year. It has priced in as much as 135 basis points this year based on the lows in the eurodollar contract. One can expect a dollar rally driven by cyclical assumptions to run out of gas somewhere around the second rate hike in the cycle. Remember the dollar weakened through much of the 1994 tightening cycle.

And foreign investors have to become sated with US assets before the current account funding story is manifested in dollar weakness. It may well take a significant shock to financial markets to prompt this decision by foreign investors like a bursting of what I think is a credit market bubble in the US. Perhaps it could ollow another terrorist attack on the US and a Bush-administration response and a surge in global risk aversion. Or it could simply unfold over time with little fanfare until price action convinces the market that foreign investors are not putting much new capital to work in the US. While not expected it could come in the form of a spurt in US inflation.

But the structural story will come back one way or is basic economics. The only way to avoid it is by the US increasing its savings rate. I am confident the rest of the world will not dig the US out of its dependence on global savings by becoming low saving, high consuming economies. And there is no political party eager to address low US private consumption with something like a VAT system replacing much of income tax that would encourage savings over consumption. Government could help the preferred adjustment path as well with something where there is political support across party lines...budget deficit reduction. Budget surpluses are a starting point for avoiding the harsh adjustment that a dollar devaluation would bring if the status quo persists.

David Gilmore


Forex Trading News

Forex Research

Daily Forex Market News
Forex news reports can be found on the forex research headlines page below. Here you will find real-time forex market news reports provided by respected contributors of currency trading information. Daily forex market news, weekly forex research and monthly forex news features can be found here.

Forex News
Real-time forex market news reports and features providing other currency trading information can be accessed by clicking on any of the headlines below. At the top of the forex blog page you will find the latest forex trading information. Scroll down the page if you are looking for less recent currency trading information. Scroll to the bottom of fx blog headlines and click on the link for past reports on forex. Currency world news reports from previous years can be found on the left sidebar under "FX Archives."

Actionable trading levels delivered to YOUR charts in real-time.

Register To Test Your Amazing Trader

GVI Trading. Potential Price Risk Scale
AA: Major, A: High, B: Medium

Tue 17 July 2018
AA 08:30 GB- Employment
A 13:15 US- Industrial Production
AA 14:00 US-Powell Testimony
Wed 18 July 2018
AA 08:30 GB- CPI
A 12:30 US- Housing Starts/Permits
AA 14:00 US-Powell Testimony
Thu 19 July 2018
AA 1:30 AU- Employment
AA 08:30 GB- Retail Sales
A 14:30 US- EIA Crude
A 12:30 US- Weekly Jobless
Fri 20 Jun 2018
A 12:30 CA- CPI/Retail Sales

John M. Bland, MBA
co-founding Partner,

Global-View Affiliate Program

We are starting an affiliate program to market some of our products.

Send me an email if you would be interested or if you know someone who would like to be an affiliate. Generous commissions payout for those accepted.

Put the word "affiliate" in the email subject line.

Contact us

Start trading with forex broker Markets Cube

Max McKegg's Daily Forex Trading Forecasts

Veteran FX Trader, Max McKegg, forecasts all the Major currencies and the Australasians; providing Daily and Medium Term Trading forecasts to subscribers, who include large Banks the world over, as well as individual traders in more than 30 different countries.

Request a TRIAL of Max's Forex Service.


Retail Forex Brokerage Changing!

Are you looking for your first broker or do you need of a new one? There are more critical things to consider than you might have thought.

We were trading long before there were online brokers. Global-View has been directly involved with the industry since its infancy. We've seen everything and are up-to-data with recent regulatory changes.

Our Best Brokers listing section includes:Forex Broker Reviews, Forex Broker Directory, Forex Broker Comparisons and advice on How to Choose a Forex Broker

If would like guidance, advice, or have any concerns at all ASK US. We are here to help you.

SEE Our Best Brokers List

Currency Trading Tools

  • Live rates, currency news, fx charts. 

  • Research reports and currency forecasts.

  • Foreign Exchange database and history.

  • Weekly economic calendar.

Directory of  Forex trading tools

Terms of Use    Disclaimer    Privacy Policy    Contact    Site Map

Forex Forum
Forex Trading Forum
Forex Forum + forex rates
Forex Forum Archives
Forex Forum RSS
Free Registration

Trading Forums
Currency Forum Guide
Forum Directory
Open Forum
Futures Forum
Political Forum
Forex Brokers
Compare Forex Brokers
Forex Broker News
Forex Broker Hotline

Online Forex Trading
Forex Trading Tools
Currency Trading Tools
Forex Database
FX Chart Points
Risk/Carry Trade Chart Points
Economic Calendar
Quicklinks to Economic Data
Currency Futures Swaps
Fibonacci Calculator
Currency Futures Calculator

Forex Education
Forex Learning Center
FX Trading Basics Course
Forex Trading Course
Forex Trading Handbook

Forex Analysis
Forex Forecasts
Interest Rate Forecasts
Central Bank Forecasts

FX Charts and Quotes
Live FX Rates
Live Global Market Quotes
Live Forex Charts
US Dollar Index Chart
Global Chart Gallery
Daily Market Tracker
Forex News
Forex Blog
Forex News
Forex Blog Archives
Forex News RSS
Forex Services
Forex Products
GVI Forex
Free Trials
FX Bookstore
FX Jobs and Careers
Jobs USA
Jobs UK
Jobs Canada

Forex Forum

The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.

Forex News

The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.

Currency Trading

Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by

Forex Brokers

The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.

Forex Trading

Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.

FX Trading

Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.

Forex Blog also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.



By using this website, you are agreeing to our Privacy Policy and Terms of Use, and Cookie Policy

Copyright ©1996-2014 Global-View. All Rights Reserved.
Hosting and Development by Blue 105