Forex latest Update :-
U.S.: Rates to remain low, but an exit strategy is ready.
The economic growth is on the move again and some tangible results should be seen shortly. Inventories are being implemented and production is increasing. Spending will improve, along with commodity prices, supported by the world economic recovery. In August, car sales have moved up more than 50% year-on-year in China, India and Brazil. The housing market should continue to show the way in the United States. Housing starts rose 1.5% in August, while existing home sales declined 2.5%, but they remained well above the low registered in November. In effect, during last week FOMC¡¦s meeting, the Fed appeared more optimistic about the economic growth, albeit activity should remain subdued for some time. Durable good orders fell 2.4% (+0.5%) in August, after having increased 4.8% in July. Orders are up overall for the quarter, capital goods orders (excluding aircraft and defense) increased almost 9.0% annualized over the three months, but activity is not strong enough to relief the unemployment rate from the bottom yet. As a result, rates will remain low for now and an exit strategy will be implemented as soon as the economics¡¦ turnaround becomes sustained. The Federal Reserve postponed the timeline for the purchase of mortgage-backed and agency debt to the end of the first quarter of 2010. However, current recovery should be mild, since recapitalization is still in process. The huge deficit will weight on U.S. growth and limit the American economic potential. Unemployment will remain high and savings will increase. Americans are adapting to the new reality, characterized by tight credit and increasing commodity prices, by reducing spending and tempering debt. The strong expansionary cycles of the past are history.
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