Keep an eye out for the Kiwi and Aussie as the tides start turning on the Dollar

Wednesday, February 25, 2009

Monday saw US stocks fall the their lowest level in nearly 11 years after early indications showed that the markets would respond well to the US’s purchase of close to 40% of Citigroup. Monday also saw the Dollar losing steam against many currencies as the brokers trading the USD decided to take their chances somewhere else. President Obama has the economic world puzzled, on one hand he is spending like there is no tomorrow (by telling his citizens that if he does not spend like this there will be no tomorrow) and on the other hand he is promising to cut the deficit in half within two years.

This is one reason I always stress to people to not only listen to what someone is saying, but hear it too – President Obama’s actual words when announcing this yesterday was “I will work to reduce the deficit I inherited by half…” – the key part of that sentence is “I inherited”. While the US runs up a three Trillion Dollar debt in Obama’s first month, he is talking about lowering the debt he came into office with, which was 1 Trillion Dollars. So if you put the numbers together, he is looking to shave 500 Billion off of a 4 Trillion Dollar debt – which leaves 3.5 Trillion Dollars left owed to whoever buys up the bonds and treasury bills. 3.5 Trillion is larger than the entire fiscal budget for the whole of South America to put this number into perspective. It is enormous and it is this ultimate number that has many people scared.

The US Secretary of State was in China last week practically begging China to continue buying their debt – ironic that the capitalistic US is asking the communist China to basically fund all the activity that the communists have been preaching against since Lennon. I think we can begin to watch the Forex Online traders and investors’ shying away from the Greenback in the near future – as big spending and higher taxes to offset the big spending does not work well and from all indications, this is what Obama will be doing.

As for Europe, they are in for a rough ride. The Brokers trading the Euro woke up yesterday to news that Fitch (another feared rating company) is warning that Austria’s ‘AAA’ rating is in jeopardy – now even I know that this is not good – Austria was typically a well-to-do nation. Also, there is speculation that some of Spain’s largest banks might be insolvent – and the financial misery in Europe is worse than a Norwegian Winter. Forex Online traders were not too happy that the EU leaders met in Germany to talk about a game plan for the April G20 meeting – and not the pending doom that is facing Europe or a possible solution.

I still believe there is money to made down under – keep an eye out for the Kiwi and Aussie as the tides start turning on the Dollar.


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