User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Tuesday May 25, 2010 - 10:50:18 GMT
Foreign Exchange Analytics - www.fxa.com

Share This Story:
| | Email

Deflation Threatens, Policy Response Limited (FXA)

With US core CPI up 0.9% year-over-year in April, the lowest annual rate since 1966, and core PCE price index up 1.3% year-over-year in March, the US economy is not generating much in the way of inflation.  And going from low inflation to negative inflation is a short hop skip and a jump when the unemployment rate is nearly 10%, private demand is anemic, housing sector wobbly and on the verge of another downturn, exports facing headwinds from a firm dollar and weak external demand, a still non-credit creating banking system and fiscal policy effects on the down hill side of peak impact. 

 

While it would be hubris to forecast a deflationary spiral ahead, the risks of a broad decline in prices driving savings up is still a risk for the US and global economy.  Deflation also implies falling asset prices and falling household net worth (lower real estate and equity prices).  So I ask what can be done, from a policy point of view, if deflation threats build in the next few quarters?

 

Well BOE MPC member Posen noted today that nothing can be expected from fiscal policy makers ahead in the UK if deflation were to rear its ugly head.  Posen, a student of Japan’s lost decade (more like lost decades) also argued that the US and UK are not Japan when it comes to preventing deflation from taking root…both are more open and dynamic economies, even if the fiscal firepower is more limited than Japan’s was in the 1990’s.  Looking at US politics ahead of the November 2010 mid-term elections I would argue that the door is pretty firmly shut on another fiscal policy stimulus.  The UK government led by the Conservatives was elected on a pledge to cut the deficit…today Chancellor Osborne outlined GBP6.5bln in savings…and more will be forthcoming in the next budget.

 

The Euro Zone is frantically reining in fiscal stimulus…even in countries where the economy is in serious contraction…arguably already in deflation…Greece and Ireland come to mind.  Even Germany is unveiling budget cutting measures.  And EU finance ministers under the urging of the German government are contemplating changes to the EU Treaty that would strengthen fiscal policy compliance with stricter sanctions.

 

Europe is done fiscally.  The US is all but done on fiscal stimulus at least through the November 2010 election and only after if the Democrats retain majorities in the House of Representatives and the Senate. 

 

Japan is at its debt limits too…worse debt to GDP than Greece…assumption here is that this homogeneous and compliant population will bequeath its huge private savings to the government to pay down the debt at some point in the future.  But the government is debating limits on JGB issuance ahead and the prospects for Japan’s enormously unpopular government to spend its way to prosperity is severely limited. 

 

The only seemingly unconstrained fiscal provider on the planet appears to be China which has instituted a number of large and powerful, not to mention effective, fiscal stimulus packages.  But even here the government is not eager to keep writing checks to drive domestic investment indefinitely (increasing capacity) at a time when the outlook for global exports is questionable at best. 

 

So it all boils down to central banks.   With the BOE and Fed in quantitative easing mode and looking for a way out, there is reason to think that neither central bank will volunteer to adding to balance sheet expansion anytime soon short of a serious dose of financial contagion…a run on the banking system.  The ECB has scope to do much more but not the stomach for it and an awesome if dogmatic excuse…sole mandate of price stability and this is an asymmetric mandate…inflation bias.   ECB could cut the refi rate to zero or near zero and leave its bond purchases unsterilized (admittedly there is reason to believe that the ECB is not really sterilizing the purchases as they accept term deposits as collateral for loans).   The BOJ is not inclined to do more – not even with the cabinet breathing down its neck to do more. 

 

Heaven help us if there is a more serious round of financial contagion ahead…the European debt crisis has driven LIBOR out to the highest rates since July of 2009, though well under the peak rates of 2008.  And there are signs that European banks are having a harder time issuing CP at rates and maturities that US money market funds want…regulatory changes over this body of asset managers is changing at the end of the month mandating that 30% of securities held are for 7 days or less while most bank CP programs are 3 and 6 months.   I suspect the ECB is going to get a rude awakening in coming days as European banks turn to the central bank for more funding. 

 

So we need to pray that stocks go up and the shape of the recovery is V-like, not W, not U, not L and not I.  I can’t help of thinking of the predicament BP engineers are in right now off the coast of Louisiana when contemplating the job ahead for the world’s central banks. 

 

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."



Elevate Your Trading With The Amazing Trader!

The Amazing Trader includes:
  • Actionable trading levels delivered to YOUR charts in real-time.
  • Live trading strategy sessions.
  • Market Updates with Trading Tools.

Register To Test Your Amazing Trader


Trading Ideas for 15 December 2017

Register for the Amazing Trader

1.

Amazing Trader EVENT RISK Calendar:

Thu 14 Dec
23:50 JP- Tankan Survey

Mon 18 Dec
10:00 EZ- final HICP
Tue 19 Dec
09:00 DE- IFO Survey
13:30 US- Housing Starts/Permits
13:30 US- Current Account
Wed 20 Dec
15:00 US- Existing Homes Sales
15:30 US- EIA Crude
Thu 21 Dec
03:00 JP- BOJ Decision
13:30 CA- CPI & Retail Sales
13:30 US Weely Jobless
13:30 US- GDP
Fri 22 Dec
09:30 US- GB- GDP
13:30 US- core PCE Deflator & Presonal Income
15:00 US- New Homes Sales
15:00 US- final University of Michigan
17:00 US- early Closes
Mon 25 Dec
00:00 Christmas Holidays

Forex Trading Outlook


Potential Trading Opportunities

  • POTENTIAL PRICE RISK: HIGH-Medium- Thu --23:50-- JP- Tankan Survey
John M. Bland, MBA
co-founding Partner, Global-View.com EXCLUSIVE: Global-View Daily Trading Chart Points Updated

EXCLUSIVE: Global-View Free Forex Database updated




TRADER ADVOCACY ARTICLES

Trader's Advocate Articles..

pic

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 Global-View.com.

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

Global-View.com 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 Global-View.com. 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.

 

WARNING: FOREIGN EXCHANGE TRADING AND INVESTMENT IN DERIVATIVES CAN BE VERY SPECULATIVE AND MAY RESULT IN LOSSES AS WELL AS PROFITS. FOREIGN EXCHANGE AND DERIVATIVES TRADING IS NOT SUITABLE FOR MANY MEMBERS OF THE PUBLIC AND ONLY RISK CAPITAL SHOULD BE APPLIED. THE WEBSITE DOES NOT TAKE INTO ACCOUNT SPECIAL INVESTMENT GOALS, THE FINANCIAL SITUATION OR SPECIFIC REQUIREMENTS OF INDIVIDUAL USERS. YOU SHOULD CAREFULLY CONSIDER YOUR FINANCIAL SITUATION AND CONSULT YOUR FINANCIAL ADVISORS AS TO THE SUITABILITY TO YOUR SITUATION PRIOR TO MAKING ANY INVESTMENT OR ENTERING INTO ANY TRANSACTIONS.

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