To many observers, 2015 was a relatively lackluster one in terms of the financial markets. The S&P 500 is basically flat compared to a year ago, as it the yield to on 10-year Treasury bonds. The world of Forex trading is a complex one of sometimes arcane cause and effect. For those involved in Forex trading, several stories can influence their trading decisions.
US Interest Rates
The Fed has finally agreed to a small rise in the US interest rates, the first such increase in seven years. To the casual saver, this will result in a very minor increase in the return on CDs and Money Market accounts. The bigger effect is likely to be a stronger US dollar. This may provide an uptick in foreign travel by US tourists looking for slightly better value for their vacation dollar. The long-term effect on the Forex market is yet to be determined.
Falling Oil Prices
The cost of a barrel of oil is about half of what it was at this time in 2014. This results in more money in consumers’ pockets. On the negative side, those heavily invested in the energy sector are suffering and income to oil-producing countries is falling. Those working in the energy sector are also facing a very uncertain future.
Falling US Unemployment
Unemployment in the US is at 5.5%. To those who have been the victims of long-term unemployment, this is welcomed the news. It also signals a problem for employers, especially those whose workforce consists primarily of low-wage workers. As the labor market tightens these companies are being forced to increase wages, and since most of these companies are multinationals the effect is felt in the US and abroad.
At the same time, the underground economy in the US is rising, with some estimates having it at $2 trillion. The underground economy was once used to refer to illegal activities. Now those working in the shadows are just as likely to be in service industries and other legitimate concerns. While the underground economy has long existed in other parts of the world, it is relatively new in the US. Some estimate that the loss in tax revenue alone is about $500 billion.
In an increasingly interconnected world economy, it is easy for Forex traders to make assumptions based on stories such as those above. However, the need for careful analysis is important. For example, the tighter US labor market has spawned articles that state that this will be good for the strength of the US dollar along with an almost equal number who state the opposite.
One of the best sources for accurate analysis in terms of how financial news is likely to affect the Forex market comes from highly rated and reputable Forex brokers, such as CMC Markets, which is rated in the top 10 brokerage firms by Money.co.uk.
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