Fed and European Banks Take Action
It is hoped that the recent coordinated rate cuts by the US Federal Reserve and European Central Banks will thaw frozen credit markets globally. The credit crisis has been trickling down into the everyday economy. Corporations are finding it difficult, if not impossible, to obtain short term loans for everyday operations and consumers are feeling the pinch in the form of tightened credit for major purchases such as autos and appliances. Despite a dismal economy the US dollar continues to hold steady providing investors with plenty of Forex opportunity.
Banks Slash Rates
The central banks slashed rates by half a percentage point and at present it is not clear how long it will take for these cuts to affect credit markets. “These credit market conditions did not happen overnight, and it’s not going to be resolved in one night, either,” said Robert Dye, senior economist for PNC Financial Services Group. Who often covers the global interbank forex marketplace. Moody’s Investors Service predicted a spike in credit defaults by risky corporate borrowers making lending a less than attractive enterprise.
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Too Little Too Late
The recently passed $700 billion dollar bailout which was supposed to rebuild economic confidence instead triggered massive sell offs in global markets. Investors feared that the plan was too little and too late. While markets around the world fell the US government worked to inject more money into the world’
s banking system, including liquidity needed in the world interbank forex market as well as loosen up frozen credit markets.
Treasury to Increase Bond Sales
The US Treasury Department named a former Goldman Sachs executive Neel Kashkari to oversee the new program. The Treasury Department also announced it would increase bond sales to pay for the huge bailout package recently approved by congress and hastily signed by President Bush. The US Federal Reserve increased a short term loan program to $900 billion dollars. Despite all these moves world markets remained in chaos. Despite economic fears currency markets still offer investors Forex opportunities and the strong US dollar is offering many investors a safe haven.
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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.
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There are many reasons politicians oppose the bailout of Wall Street and financial institutions. Some are based on ideology, and many politicians are responding to constituent opposition to the bailout. Financial markets, including the interbank Forex, are reacting to the failure of the US congress to pass the bailout bill. Reaction to the bailout failure from foreign sources has not been positive and financial markets are frozen. For readers outside the US, here are some reasons why so many oppose the bailout.
Irresponsibility on Wall Street
US taxpayers do not feel they should be held responsible for the greed and irresponsibility of Wall Street traders. The middle class in the US feels they are already overtaxed and burdened with rising food and fuel prices and are in no mood to bail out traders and executives who should have known better.
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