The Bailout Bill

Forex markets are wondering if the overwhelming passage of a revised bailout bill will have any influence on the House when the projected vote takes place Friday. No matter what action the House takes it is sure to make for a wild weekend in global markets including Forex markets. The US dollar currently is higher than 12 of the 16 most traded currencies. The strong dollar is offering investors many Forex opportunities and at present Forex markets remain relatively stable compared to stock markets, allowing for FX traders to take advantage of the current situation.

US Manufacturing Sector

The US also faced bad news from its manufacturing sector with the manufacturing index falling to its lowest level in six years. Weak demand for US products coupled with consumer uneasiness with current economic conditions, higher food and fuel prices, and the future for the manufacturing does not look good. US consumers saw any wage gains made in the past few years disappear limiting consumer spending. This trend is expected to last until at least the end of the year and could result in more job losses. In the US consumer confidence is at its lowest since 2000.

The Credit Crunch

The current credit crisis is starting to spread from Wall Street to ‘Main Street’ with tightening credit, massive home foreclosures, and evidence that the US is headed into a recession. The global economy is fragile at present and in Europe economic activity seems to be collapsing at a faster rate than in the US. It is hoped that the bailout will reinvigorate worldwide credit markets and interbank lending that had frozen up while financial institutions staggered under the weight of failed mortgages.

Central Banks

Central banks have injected billions of dollars to maintain liquidity and have instituted emergency currency exchange programs. Credit is still frozen awaiting action by the US house on the bailout bill. Interbank FX lending rates continue to rise and reflect an aversion to risk at this time. Many economists are now stating openly that a global recession is in the works. Risk adverse investors are taking advantage of the the dollar is offering during the Forex opportunitiesworst economic crisis since the great depression.

Although public opposition to the bailout remains political analysts believe the House is more likely to pass the revised version of the bailout bill. In a statement Treasury Secretary Paulson said, “This sends a positive signal that we stand ready to protect the U.S. economy by making sure that Americans have access to the credit that is needed to create jobs and keep businesses going.” Jump starting credit markets is seen as one way to avoid an all out recession.

Forex Opportunities

Although the Dollar has been holding its own in Forex markets, long term uncertainty about the future of the US dollar remains. The strong dollar is providing many investors with unique Forex opportunities. The House vote on Friday is eagerly awaited by Forex investors and traders worldwide. Who knows, it is possible that the bailout will provide Forex opportunities unheard of before the crisis.

Quick Forex Tip: There are many factors that affect currency exchange rates and those who want to trade forex markets should be familiar with them. Economic factors are probably the most important in determining the value of a currency. Political conditions can also affect exchange rates. Those who want to trade forex markets would be well advised to keep abreast of current political and economic events. Thanks to the internet, those with the right knowledge and an internet connection can join this exciting market and take advantage of the lucrative opportunities it can provide for investors.