US Dollar (Part I)
It is important for the currency traders to have a good grasp of the general economic characteristics of the most commonly traded currencies. US Dollar is the most heavily traded currency in the global economy.
Traders need to also know the difference between the expected and the actual data. Some currencies tend to track commodity prices while others may move in complete contrast.
The correlation between the currency markets and news is very important. News or data that is in line with the expectations has less of an impact on currency movements than unexpected news or data. Therefore short term traders need to closely monitor the expectation of the currency markets.
United States is the worlds leading economy. US GDP is approximately three times the size of Japan, five times the size of Germany and seven times the size of UK. The US economy is now a service oriented economy with almost 80% of GDP coming from real estate, transportation, finance, health care and business services.
United States capital markets are the most efficient markets in the world. United States has the worlds most liquid and deep equity and fixed income markets in the world. The manufacturing sector is still formidable and US Dollar is particularly sensitive to the development within the sector. Cheap capital formation is what drives any company or any economy and United States capital markets help in cheap capital formation.
Foreign Direct Investments (FDI) into the US is equal to almost 40% of the total net inflows for United States. Investors from all over the world purchase US assets due to their liquidity and safety. The import and export volume of US also dwarfs the countries. This maybe due to the sheer size of US as true import and export represent only 12% of the GDP.
United States is running a large CA deficit for more than a decade now. US economy is facing the paradox of the twin deficits. One is the Budget Deficit and the other is the Current Account (CA) deficit.
The large CA deficit makes the US Dollar highly sensitive to changes in the capital flows. US need to attract a few billion dollars of capital inflows daily in order to prevent the decline in the value of US Dollar.
United States is the trading partner of many countries across the globe. US is also the member of the World Trade Organization (WTO). US trade is equal to roughly 20% of the world trade. A weaker US Dollar will help boost US exports whereas a stronger US Dollar makes the US exports expensive and US imports cheap.
Leading export markets for United States are: Canada, Mexico, Japan, EU and UK. Leading import sources for United States are: Canada, China, Mexico, Japan and EU. The growth and political stability in countries that are leading export markets for US are important. For example, should Canada growth slow; its demand for US exports will fall that will have a ripple effect on US growth. - 23305
Traders need to also know the difference between the expected and the actual data. Some currencies tend to track commodity prices while others may move in complete contrast.
The correlation between the currency markets and news is very important. News or data that is in line with the expectations has less of an impact on currency movements than unexpected news or data. Therefore short term traders need to closely monitor the expectation of the currency markets.
United States is the worlds leading economy. US GDP is approximately three times the size of Japan, five times the size of Germany and seven times the size of UK. The US economy is now a service oriented economy with almost 80% of GDP coming from real estate, transportation, finance, health care and business services.
United States capital markets are the most efficient markets in the world. United States has the worlds most liquid and deep equity and fixed income markets in the world. The manufacturing sector is still formidable and US Dollar is particularly sensitive to the development within the sector. Cheap capital formation is what drives any company or any economy and United States capital markets help in cheap capital formation.
Foreign Direct Investments (FDI) into the US is equal to almost 40% of the total net inflows for United States. Investors from all over the world purchase US assets due to their liquidity and safety. The import and export volume of US also dwarfs the countries. This maybe due to the sheer size of US as true import and export represent only 12% of the GDP.
United States is running a large CA deficit for more than a decade now. US economy is facing the paradox of the twin deficits. One is the Budget Deficit and the other is the Current Account (CA) deficit.
The large CA deficit makes the US Dollar highly sensitive to changes in the capital flows. US need to attract a few billion dollars of capital inflows daily in order to prevent the decline in the value of US Dollar.
United States is the trading partner of many countries across the globe. US is also the member of the World Trade Organization (WTO). US trade is equal to roughly 20% of the world trade. A weaker US Dollar will help boost US exports whereas a stronger US Dollar makes the US exports expensive and US imports cheap.
Leading export markets for United States are: Canada, Mexico, Japan, EU and UK. Leading import sources for United States are: Canada, China, Mexico, Japan and EU. The growth and political stability in countries that are leading export markets for US are important. For example, should Canada growth slow; its demand for US exports will fall that will have a ripple effect on US growth. - 23305
About the Author:
Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Try Strignano's Forex Signals free. Discover a revolutionary Forex Robot Trading System!
posted by Mr. Forex at
4:54 AM
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