This hasn’t happened for over 3 months. 4 days of Stock Market gains in a row. Wow.
Could this be it? Have we hit the bottom? Our we on our way back up?
No one wants to call it. No one wants to jinx it. However, there is reason to be a optimistic. The fundamentals are starting to strengthen; some confidence is returning.
The US Treasury Secretary, having messed up the message the first time he tried to “instill confidence” in the markets, promised to release details of the plan to deal with the Toxic Assets of the US Banks. This is in line with word out of the G20 meeting this weekend.
What does this mean for the Forex Markets? Well, the most obvious thing would be the move away from Risk-averse trades; more investment in higher yielding currencies…at least the few there are left. With most major central banks cutting interest rates during this time, almost all of them have really low rates.
If we go with the trends that have established themselves since this recession thingy got going, we would say that the Dollar and the Yen would be the immediate losers. The fundamentals of the Japanese economy are not good. With confidence returning and Equities gaining, I think it’s pretty safe to say that the Yen is going to go down. The Dollar, on the other hand…well it’s not that certain. There have been instances this year when Equities have done well, and the dollar has done well, or at least not as bad as the Yen. I think with the US seeming like its coming out of this thing might favor the Dollar in the long term, especially if the fear in the markets reduces substantially.
In the short-term though, the other major currencies should get a boost from Equity markets at the expense of the dollar. I don’t expect any major moves upwards for the markets, but we should hopefully be inching our way higher.
It really is time for things to start getting better. We will take this one day at a time.