Forex Fundamental Analysis

Cyprus joined the European Union in 2004 and is a member of the Eurozone, adopting the common currency in 2008. The island of Cyprus is the largest in the eastern Mediterranean, but has been divided into a Turkish and a Greek region since 1974 when Turkey occupied the north of the island.

Japan has the largest level of public debt of any industrialised country at more than twice the nation’s GDP. Fortunately for the Japanese, much of this debt is held at home, but any loss of confidence in Japan’s ability to meet its obligations could send borrowing costs sky-rocketing.

The governments of the four largest economies within the Eurozone, Germany, France, Spain and Italy, have agreed to boost economic growth within the bloc. They are targeting a 1% boost to GDP to be achieved by boosting spending on infrastructure and other investments to the tune of €130 billion.

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The United States Federal Reserve has adjusted its growth figure for the year down from 2.9 to 2.4%. The reduction of 0.5% on the nation’s GDP projection doesn’t sound too bad, but when you express it as a percentage of the initial growth estimate, the Fed has pruned it expectations by a whopping 17%.

The only commodity that has been in short supply in the global financial crisis has been confidence. The origins of the worst depression that the world has seen since the Great Depression in the 1930s can be traced back to sub-prime lending.

The Greek people are clearly angered by the economic crisis that has heaped austerity measures on them in return for external support to prevent the nation from sliding into bankruptcy.

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Ratings agency Moody’s has downgraded its sovereign credit rating on Spain and Cyprus, which is also a Eurozone member. In the case of Spain, the rating has been dropped by three levels from A3 to Baa3, leaving it just one grad above junk status.

No less a luminary than George Soros was suggesting that the Euro crisis requires banking reforms to be instigated before a credible, stable currency can emerge. He also suggested that political leaders had failed to grasp the fundamental nature of the problem.

Speaking to the US Congress, the Federal Reserve Chairman, Ben Bernanke, said that the Reserve was carefully monitoring risks to the economy and is ready to take action if circumstances call for it.

Right up until the €100 billion bailout deal for Spanish banks was announced at the weekend, Spain was at great pains to explain that it did not require a bailout and could obtain the funding it needed to service its debts from the market.

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The Euro crisis is somewhat analogous to the Titanic disaster in that we know there are icebergs ahead and that we should avoid them – even if we cling to the idea that SS Single Currency, The Euro, is indeed unsinkable.

Of the major, democratic economies, undoubtedly Australia’s passage through the stormy seas of the global financial crisis has been the smoothest. Of course, that is not to say that Australians have had it easy in economic terms, nor is it to downplay major flooding problems which hit the nation last year.