The stock market continues its correction with another significant fall on US markets Monday. The Dow Jones was down over 200 points or 1.35% with the S&P 500 down 1.65% and Nasdaq 1.46% respectively. Why are we reporting on the stock market when we are currency traders? Because there is always a flavour of the day for financial markets to follow and falling stocks is the flavour of the day, or if you like flavour of the month right now and this is helping drive certain currency movements.
The main reason for the significant and sustained fall is that the US Fed is no longer printing free money and injecting it into the US economy and it must now survive on its own with interest rates at close to 0% and the potential for them to rise in 2015. Stock market traders, hedge funds and large speculators are electing to exit, take what profit they have and are putting the proceeds back into cash.
Adding weight to the decline is the recent forecast by the IMF of lower growth for the worldwide economy in 2015 and this also comes on the back of the US Fed Minutes from last week that showed US Fed officials were concerned that slowing global growth may also stall the US economic recovery and it may force them to keep rates lower for longer.
Essentially stock market traders have their knickers in a knot over the fact that there is no more free money from the US Fed being injected into the economy, interest rates may rise in 2015 (regardless of what the US Fed says now) and it all comes at a time when global growth is expected to remain low. "Sell" is the safety play in these circumstances and thus stocks are falling and the traditional safe haven currencies such as the CHF and JPY are rising.
Andrew Barnett and the LTG GoldRock Team run weekly live trading and coaching sessions for investors interested in learning how to trade Forex. Go to www.ltggoldrock.com
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