Forex Training Blog

Some of the issues still in play include credit agencies Standard & Poor’s and Moody’s Investors Service indicating they might downgrade Greece’s debt rating Unless the country enacts fiscal reform to deal with its massive debt.

Also, U.S. initial claims for last week jumped by 22,000 to 496,000 - the highest level since mid-November.

The markets are still spooked by unexpectedly weak jobs data, worries about Greece’s financial woes and U.S. lawmakers’ renewed preoccupation with an expensive overhaul of the U.S. health-care system.  There’s also concern amongst investors about the global debt situation and the longevity of the recovery.

The precariousness of the U.S.’s nascent economic recovery was further evidenced by data released last week:

- U.S. banks posted their sharpest drop in lending last year since 1942.

- Sales of new homes plunged to their lowest level on record last month.

- Consumer confidence nosedived this month.

- Hundreds of community banks could be forced out of business due to their exposure to troubled commercial loans.

In January, new home sales in the U.S. unexpectedly slumped to their lowest level in 47 years, raising fears that the housing market there has lost its oomph, and could start its downward trek again, despite the billions of dollars the government has been pouring into that segment of the economy.

Bernanke asserts that the economy still needs to be on life support.  The question is, can the economy go it on its own once government stimulus dissipates, or are we headed for a double-dip recession?  Further, can lawmakers find a solution to the debt problem?

Bernanke went on record with the House financial committee last Wednesday as saying that it would be a mistake to try to balance the budget over the next couple of years because government spending is still required to buoy the economy - hence, his statement that low interest rates are in store for an extended period of time to shore up the nascent U.S. recovery.

David Rosenberg, a well-respected economic prognosticator (ex-Merrill-Lynch) warns that we should all take a defensive stance and be income-oriented - no Hail Mary passes this year.  He reminds us that the markets have been anemic for the past six months, or so.  He sees a topping formation, pointing out that rallies have been on low volume, and sell-offs consistently on high volume.  He is clearly in the bear camp.  Ditto for me.

Fiat currencies are continuing to lose their luster.  Even if Greece gets resuscitated, there will be other countries looking for a hand-out.

George Soros has warned that, if the European union doesn’t fix its finances, the euro may fall apart.  That said, the euro is an extremely deep market, with at least $1.2-trillion in daily trading volume, dwarfing the pound’s daily trading volume in 1992, when it collapsed.

This entry was posted on Monday, March 1st, 2010 at 2:59 pm and is filed under News. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.