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Weekly Forex Market Outlook: Economy and Politics

Tuesday’s election will determine the next president of the United States, the largest economy in the world; however it is probably its psychological impact that moves the market on a daily basis rather than any speculation about the possible outcome from an economic plan.

Red or Blue!
Some analysts believe that a Republican administration may look more market-friendly but it is also possible that a decisive victory by the Democrats would be encouraging if it can improve the sentiment and make people more optimistic.

Growth Outlook
European Commission will release its estimate for economic growth in euro-area on Monday. Recent data showed that the economy have already contracted in the U.S. and U.K. when other reports this week, from manufacturing and service sectors in the U.S, U.K, and Germany, may also show that there is no end for this slowdown in the near future. At this time it is also probable that the market interpret negative data as the possibility of more rate cuts and for a longer period of time.

Easing Policies Continues
Monetary policies become more and more accommodative as the central banks continue to lower the borrowing costs. European Central Bank, Bank of England, and the Reserve Bank of Australia all are expected to cut interest rates this week. However any rate cut less than the expectations could be completely disappointing to this fragile market.

Employment Report
Considering the last week reaction to the U.S. GDP, one may conclude that the market tends to see the glass half full than half empty! But it may not be the case when it is about heavy job losses. Friday is certainly the most important day of the week when the employment report may show that the U.S. economy has lost as much as 180,000 jobs in October; and it is difficult to imagine the market patient when the unemployment rate rises above 6 percent.

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  1. With Barack Obama winning the presidency, I bet a whole lot of psychological impact will be made. Equities and bonds are also expected to be on the rise.

  2. There were lots of activity concerning the USD/JPY pair but most were of risk-reduction moves. Also noticed that when it gets nearer to the big announcement, equities were at an all time high!

  3. Well, I think even with Obama’s anticipated victory, whatever trend the market Forex is into right now is short term. I’m guessing we’ll go into risk aversion mode and the market will be conservative after the heat dies down (right now the news is VOLCANIC according to Google Trends!)

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