Managed Forex Accounts EUR USD Outlook 2008 2 3
Below is a MRR and PLR article in category Finance -> subcategory Investing.
Managed Forex Accounts: EUR/USD Outlook for 2008
Overview
Explore the trajectory of the EUR/USD in 2008, understand why the USD weakened in 2007, and discover how the U.S. presidential elections could impact financial markets.What to Expect from Interest Rate Cuts
In 2007, the U.S. Federal Reserve was cautious about cutting interest rates, doing so reluctantly and only when the market had already anticipated the move. Their primary concern was controlling inflation, a challenge made harder by high energy prices and a weak dollar. However, fears of oil reaching $100 per barrel have subsided.
The market anticipates further rate cuts of 25 to 50 basis points, but the Fed has other tools at its disposal, such as the Term Auction Facility introduced in December. Nevertheless, options like discount rate cuts are limited due to persistently high LIBOR rates. Even in December, Treasury yields saw significant, record-breaking increases.
Influences Beyond the U.S.
In the latter part of 2007, sovereign funds played a crucial role in stabilizing crumbling markets. For instance, Singapore's Temasek Holdings invested $4.4 billion in Merrill Lynch, the Abu Dhabi Investment Authority injected $7.5 billion into Citigroup, and the China Investment Corporation poured $5 billion into Morgan Stanley.
Sovereign wealth funds, which have existed since the mid-20th century, have grown tremendously?"from $500 billion in 1990 to an estimated $3 trillion now. Nations like Norway, Singapore, the U.A.E., Saudi Arabia, Kuwait, and China have around $2 trillion ready for deployment. These funds are expected to grow to $12 trillion in the coming years, backed by natural resources and foreign exchange reserves, significantly influencing U.S. financial market recovery.
Impact of the 2008 U.S. Presidential Elections
Historically, the U.S. dollar has strengthened when Republicans win the presidency compared to Democrats. The outcome of the 2008 elections could influence this trend, depending on how closely contested they are. According to the Stock Traders Almanac, election years generally see modest positive growth in the U.S. stock market, with an average Dow Jones increase of 9.2% over the past five decades.
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This overview provides insights into how economic factors and political events might shape the foreign exchange landscape in 2008.
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