The world economy has experienced gradual growth for another year in 2014 although yet again the projections that many economic forecasters set earlier have not been attained. Is the world economy stable? We take a look at the global growth trends for this year.
The US economy has recovered partially this year with a growth of between 1.5% and 2%. This is certainly below what forecasters had predicted but it’s a lot better than zero. The growth has been mainly attributed to the private sector and a dynamic economy. Public sector investment is still a missing link in the US economic growth and this might continue due to the heated political environment. In a nutshell, it would be correct to say that although the US economy has been stable for most of the year, it still remains below potential.
The Euro Zone Economy
For the better part of the year, the European Central Bank has been adjusting its Monetary Transaction policy in a bid to bail out some member countries that were on the verge of economic collapse. Overall, growth in Europe has slow and below average. According to the Economist growth in the first quarter of 2014 was 1.2%. Even though the ECB has adopted measures to ensure stability of member economies, countries like Italy, Greece and Portugal seem to be sinking deeper and deeper under the pressure of mounting public debt.
So is the Euro Zone economy stable? The answer is yes, but not performing as well as expected.
Beijing looks to be on upward growth cycle and has sustained 7 plus per cent growth. China’s economy grew at its slowest pace this year in the third quarter as the government implemented a new policy in an attempt to reduce dependency on exports and investment. The country’s GDP grew 7.3 per cent in the third quarter this year this being the weakest rate recorded since the first quarter of 2009.
China has been relatively stable for the last few years although a few changes in government policies may affect its future performance. For now, things are looking up for this economy.
So is the world economy stable?
The world economy is relatively stable but there is need to safeguard this stability and improve the transmission of macro-economic policies to the real economy. The US and Euro Zone economies have some catching up to do. China is showing good signs so far and might provide much needed tailwind for most developing and less developed countries (LDCs).
Forex trading can be a great way to make money but sometimes the system requires a bit of knowledge to gain higher earnings. While the system is quite simple even for beginners and the profits can be large, by following these 4 tips for making more money trading Forex, you will become one of the top earners:
1. Realize that Forex is risky and embrace this fact with a smile on your face
It's a well known fact that Forex trading is risky and the systems are notorious for their instability, regardless of the currency you trade in. This is why you must know how to manage the risk that comes from this system, embrace it and thrive on it. Some traders, who don't understand how to manage this risk, end up backing away from this system. The key solution to this risk management is to take constant, small time, manageable risks. When you take small risks, the possible losses will be smaller, but because you extend them over large periods of time, the profits will be larger. Simply put, the notorious Forex unpredictability should be an excitement for you, not a stress factor.
2. Trade less but gain more
Most traders believe that they must trade every day to gain success and increase their profits. While this idea might be true to some extent, the best way is to trade higher amounts a few times in a year. That's where the big profits are and some of the big players are following this strategy. The downside however, is that this system is riskier than trading smaller amounts each day. The most important thing is to be informed at all times and be alert whenever the market allows profitable trading.
3. Stay clear from over-diversification
This is an old business concept, but most traders don't understand it thoroughly. Essentially, diversification is bad because you firstly need to understand one critical component before going to another. In other words, you should focus on just one Forex currency, until you fully understand its behavior over time, instead of constantly diversifying your assets. Otherwise, you will just end up losing money on multiple fronts.
4. Understand the concept of compound growth
The most successful Forex traders understand that the system works great when they use the concept of compound growth. For instance, if you have a target of 50% growth for a $20,000 account, in just 10 years, you will end up with more than one million dollars. The concept is simple, the percentages add up exponentially, making you more profits each year.
A lot of new traders to the foreign exchange market wonder what causes unexpected currency movements and price changes. Just like other markets, the currency exchange rate represents the rate at which demand and supply factors balance. Due to this, when there are less sellers than buyers in the market, the rate moves up. Similarly, when there are less buyers than sellers in the market, the rate moves down.
Unfortunately, it can be complicated to determine why the balance of demand and supply has shifted. In most cases, it requires a clear understanding of the political and economic environment of the countries involved with the currencies. Some of the factors that cause currency movements have been discussed below.
It’s worth mentioning that currencies of nations that have stable governments and politics are favored over currencies of less stable nations. Even the market tends to favor the currencies from nations whose governments represent better fiscal responsibility. This directly relates to the governments spending on defense and social programs. It’s also affected by whether the country’s budget is running a substantial deficit or balanced.
Higher oil prices always have a major impact on the currencies of oil importers, such as the United States and Japan. However, higher prices help currencies of the United Kingdom and Canada. In addition to this, higher gold prices hurt the Japanese Yen and the United States Dollar. On the other hand, they have a positive impact on the Australian Dollar. Australia produces large amounts of precious metals.
It’s worth mentioning that currencies of countries with stable political and economic structures and peaceful relations are preferred over currencies from countries at war or threatened and unstable. This is one of the most important factors affecting currency movements.
Supply and Demand Effects
Last but not the least, supply and demand have a major impact on currencies in the world. When large capital flows into a currency at the expense of some other, it can be caused by the transactions made by some big fund managers or large international corporations. The currency in greater demand always benefits at the expense of currency with less demand.
These were some of the most important factors affecting currency movements. When you have a better understanding of these factors, you’re able to make the right choice when investing your money, and betting on some currencies. In order to receive the best results, you should also consult professionals to make informed choice.
Major financial institutions and banks have always been controlling the stocks, markets and foreign exchange. These institutions decide what comes down, and what goes up. According to industry experts, this trend will continue in 2015. Experts also believe that the falling euro currency may offer some benefits. It may be able to cause European growth when prices of minerals and metals fall. However, currency analysts believe that Euro will be a major letdown for investors in 2015.
Two Major Currencies for Investors
For a long time, two currencies have ruled the fate of investors. These include Euro and United States Dollar. However, these currencies have seemed off balance for most part this year. Though Euro continues to plummet down, the US Dollar has been showing some growth due to the country’s improving trade and economy.
According to currency experts, the Euro will fall up to 1.15$ as compared to the US Dollar in the next 12 months. The report given by Goldman Sachs states that the driving factor will be the diverging economic condition of regions with the Euro and the United States of America.
US States Flourishing
When it comes to the United States, Indiana has shown a record growth in the sales of RV automobiles. Similarly, the rest of the country is improving in terms of economic growth. North Dakota state has been producing large amounts of Shale Oil. Moreover, the Silicon Valley has been swamped with the record breaking sales of the new iPhone models.
New York has been producing a lot more jobs for people, and Seattle is getting numerous orders for manufacturing Boeing aircrafts. Companies like Microsoft and Google have also been helping the country’s employment generation goals.
The East Keeps Plummeting Down
On the other hand, the Eastern half of the world has been plummeting down. Europe and Japan have been fractured by numerous atrocities. China has been experiencing the country’s slowest economic growth since the 1990s. According to the International Monetary Fund, the world economy will take another 12 months to come back on track.
In recent months, only the United States has shown some promise with a growth rate of 4.8%. Countries in the Middle East and Europe has been major disappointments. Even the BRICS countries, including South Africa, China, India, Russia and Brazil haven’t experienced good economic growth.