The United States Federal Reserve (FED) has one of the greatest if not the greatest impact on financial markets and should always be on a trader’s radar and listed on their financial calendar regularly.
As we roll into the month of December the FED has a major decision to make. The federal funds rate which has been set at zero since December 2008 will possibly be raised. There could be reluctance considering the state of affairs taking place in China, however, this is no guarantee.
The meeting of the FED typically plays a roll both within the United States as well as the rest of the world. Within the United States the fear of inflation may prompt the FED to potentially raise interest rates. Presently, it can be argued that the United States economy remains depressed. While the unemployment rate is 5.3 percent overall there are groups e.g. African-Americans which are running at an unemployment rate of 9 percent. In addition, the abysmal performance of the United States stock market may alter the FED’s push to raise interest rates.
China’s growth anxieties will potentially prevent the FED from raising rates as well.
European Central Bank
The struggling European economy has seen the European Central Bank (ECB) extend its stimulus program into 2017. Forex traders should be cognizant of any reactions of the ECB and how it perceives present economic conditions within the Euro nations.
Presently, weak inflation conditions are a big concern of the ECB. In addition, unemployment is presently at 10.9 percent and is not dropping at the rate which is palpable for the ECB.
The ECB’s stimulus may help keep the Euro’s exchange rate down against the dollar which should help exports.
People’s Bank of China
China’s economy is massive and Forex traders typically keep a close eye on activities taking place economically. The recent slowdown in China’s economy has forced the People’s Bank of China to inject 140 billion Yuan into banks through its short term lending operations.
Chinese stocks have remained in a bear market falling more than 20% since June. This issue many investors wondering when the market will bottom out.
The slowdown in the Chinese economy is pushing people to invest outside of China. In addition, the returns from outside China are better than those that you would receive with a stronger economy.
The Bank of Japan
The Japanese economy is one of the largest in the world. The Bank of Japan (BOJ) plays a major role in the outcome of the Japanese economy. Forex traders should keep their eyes open for monetary policies as well as economic events taking place within the country. Recently, the Bank of Japan trimmed its economic growth forecast but did not speculate that they would be offering new stimulus programs.
The Central bank remained steady on its forecast of inflation reaching the target by the second quarter of 2016. BOJ has kept its pledge of monetary stimulus continuing its asset purchase program which is currently pegged at 80 trillion yen.
The International Monetary Fund
The International Monetary Fund plays a crucial role in keeping economic stability throughout the world. Forex traders should keep an active eye on activity/news within The International Monetary Fund. Recent volatility in the world financial markets may prevent central banks from raising interest rates.