President-elect Barack Obama’s selection of an economic team reflects, in some way, what the US economy might expect. For the most part, the chosen team members are strong dollar policy supporters. The team is very experienced and qualified to handle the recession at hand.
Two situations that may be similar but happen during different times are never an exact repeat of each other, and the second time around more tools are always available for handling the crisis. In my opinion, the new initiatives proposed or which are being considered will comfortably stir the US economy back to a growth path. However, the time frame cannot be guessed. Technically speaking, I see no sign of a USD reversal, for now, and it will remain strong. With new measures being proposed, other than fiscal policy, I am once again optimistic on the US economy.
- Many parallels are being drawn between 1929 and now, and also
between the recession in Japan in the 1990’s and now, however, these are not identical
situations. Plus different tools are available now to handle the current
recession.
- The new measures proposed, like an initiative to embark on an
ambitious infrastructure and reconstruction plan, are a very good sign for
the economy and will considerably boost it.
- Today’s Bank of England meeting is expected to result in further cuts to the UK interest rates. The European Central Bank is also expected to bring interest rates lower. Hence the US dollar is likely to remain strong.
Gold is holding pretty well. It’s still around its highs of 2008. Gold remains bullish.
Oil will drop further and is likely to come down to $30 USD a barrel.
GBP is the weakest among all currencies and is likely to drop to 1.4 and then to 1.3 against the USD. If some concrete measures are not announced to revive the economy we might even see the GBP going lower than 1.3. While, JPY remains strong but one need to be careful once it reaches 90 levels as it might bounce to around 95.
USD/PLN: Likely to go to 3.20/3.30, for now.
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