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The path ahead for the U.S. economy

Written by A Forex View From Afar on Tuesday, September 09, 2008

With the recent economic news and releases coming out of U.S., it seems that the economy is back on track, to a slowdown, of course.

The unemployment number jumped 0.4% in August. This is the second biggest gain since the 1990’s, after May of this year when the unemployment rate jumped up 0.5%. House inventories are at an 11 month high; foreclosures are at 29-year high while mortgage rates are at the same level as when the Fed Funds were at 5.25%. Now, the Fed funds are sitting at 3%, but the mortgages are unaffected.

All this points to the U.S. economy growth rate slowing down once again in the coming quarters. Many have said the economy will resume the growth path after the strong second quarter read. However, it now looks like the main drivers behind the excellent number were the cash rebates, something the economy will not see again in the third and fourth quarters.

Analyst and central banks expect growth to pick up somewhere at the beginning of 2009, but if the U.S. and European economies do not start to show any signs of improvements, the recovery period may extend beyond expectations.

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There is a constant question from some traders as to why anybody would ever need to consider the ‘F’ word when trading. Fundamentals: what is so damaging at looking at both Technical charts and having a Fundamental filter to gauge how many Lots to put on? Why is it that accepting that Technicals give us price points to trade, but Fundamentals determine the direction that we travel is so difficult for some traders to accept? Without a Fundamental Filter very few pure Technical traders would have seen this Dollar move coming today.

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