Forex Daily

Interest rate decisions of an expected rate cut from the US Federal Reserve have made the Yen weaker yesterday.Investors are reacting to rates.

Carry trades are still as risky as ever. The US dollar remains pretty much unchanged against the Euro.

Although not quite a recession the forecast for global growth in the economy is lower from the International Monetary Fund. Thoughts are that a global shutdown is likely,well according to the chief economist at IMF.

For the major economies which are already established growth will take place but in a weaker fashion. We need to be on the lookout for market turmoil.

The US sub prime debt has certainly not had its day yet with the Belgian Bank Fortis warning that it could have losses of up to 1bn euros.($1.47 billion dollars.)

This will cause its profit report to fall from what was expected to be 4bn euros down to 3bn.

Following the statement about debt share prices for Fortis fell in excess of 10% last Friday.

According to a group of economists from the World Economic Forum the US is in for a long period of recession. Nouriel Roubini a New York economist thought that the mortgage crisis in the US would soon start to spread to the consumer and indeed company loans.

Noubini had already predicted problems for tge US housing market over a year ago and indeed the effects this would have on the credit markets.

The world economic forum also predicted that China would be effected by the crisis and indeed India too.

The US Federal Reserve seemed to have opened a can of worms as European Stocks are now falling, their efforts to avoid a recession may well as said before be counter-productive.

The United Kingdom FTSE 100 has seen an index fall of 4.5% after worries that the cental banks may not follow suit with the US reduction in interest rates.

The US Federal Reserve’s shocking interest rate cut has certainly had an impact throughout the business community and on the global economy.
The Federal Reserve’s plan to lessen fears of a recession may have backfired.

Asia saw market indices gain points as investors where covering position shortfalls.Ben Bernanke’s decision to cut rates are seen by many as a sign that the economy is in a worse state than first thought.

The big wall street bank Merrill Lynch announced losses of $7.8bn for 2007. Sub-prime mortgages were once again responsible for a huge loss of investments.

Other banks such as Citigroup and JP Morgan have already announced losses due to the mortgage crisis and loan sector.

JP Morgan had earnings fall a dramatic 34% whilst Citigroup have already reported a $9.83bn loss.

The falling of the share index in Asia and Europe indicates the fear of a recession in the US is still with us.
Its is likely that the index will fall even further in the next few weeks.
The US have proposed a strategy to stimulate the market place and its proposal is approx $145bn in tax cutes which they hope would encourage spending.

Federal Reserve chairman Ben Bernanke will support spending measures or tax cuts in order to give a boost to the current crisis in the economy.
Testifying a the house budget committee will see how true Bernanke is to his word.

The Citigroup Bank are of course still in the picture with investments from other sources still in question. Citigroup are looking to cash-rich investors and hoping to confront the massive mortgage losses with potential offers from foreign governments.

It’s been a rocky ride for the largest banking group in the US.Charles Prince resigned earlier last year then Vikram Pandit was appointed the new Chief Executive. Now of course Citigroup report the financial loss in the last quarter of nearly ten billion dollars.