Forex Fundamental Analysis

A nation’s balance of trade is simply the difference between what it exports minus what it imports. In Japan, figures just released show that the trade balance with the rest of the world is negative for the eighth straight month despite the Yen’s significant depreciation.

On Saturday, the EU and the IMF gave their agreement to a bailout to Cyprus worth €10 billion, to help the nation avoid bankruptcy because of its exposure to the Greek debt crisis.

Chinese authorities have been on the alert to the inflation of a property bubble for some time and have tried to control it by increasing interest rates and insisting that banks improve their reserves, choking off the money supply.

That Cyprus financial system (and country) in general is in a dire state and requires external assistance has been a known fact for a long time now. Let's take a look at the current situation and try to understand what is going on with this fundamental analysis.

As we reported recently, Cyprus needed a bailout to ensure that the nation could continue to honour its obligations. Without the bailout, Cyprus faced a disorderly default and potential bankruptcy as early as May.

All of the world’s major exchanges ended the week higher amidst better US consumer data and recently strengthening employment figures. The dark clouds of the US “sequester” seem not to be spoiling the party for the moment.

Plunging over the Fiscal Cliff would have delivered automatic tax increases and spending cuts which, many feared, would drag the US back into recession.

As we have often noted in these articles, employment is a lagging indicator of the economic cycle with job creation kicking-in once employers are confident that their order books merit an expanded workforce.

President Francois Hollande won the French Presidential election on the promise that his government would largely abandon the austerity measures adopted by his opponent, former President Nicolas Sarkozy.

Employment is a lagging indicator of the economic cycle. Staff are only laid-off once things have got really bad and are only re-hired once employers are confident that demands on their business are growing.

With the exception of the Cac, All of the world’s major exchanges ended the week higher, with the Dow entering record new highs and other exchanges finally closing above pre global financial crisis levels.

Cyprus is a member of the Eurozone, but its economy is less than a tenth that of troubled Greece and less than 1% that of Germany, with a GDP of about €18 billion.

The Dow Jones Industrial average has broken through its previous record level to reach a new frontier and uncharted territory. The Dow hit a record high of 14256 points which broke its record close of 14164 which was seen in October 2007 before the global financial crisis struck.

The USA has an enormous problem in the shape of its debt – a problem that did not occur overnight. The debt mountain in the USA is estimated to be $16.6 trillion – roughly $83000 per head of population, given that the population of the USA is something like 200000000 souls.

There will be a changing of the guard at the Bank of Japan later this month when the governor Masaaki Shirakawa steps down on the 19th of March. A central plank of Prime Minister Shinzo Abe’s election campaign was to drive economic demand by whatever means were required.