By Glenford S Robinson
The most recent US Inflation rate data came in at 1.6%, a 0.2-basis point fall from 1.8%. What does this all mean? Well, if you are an active Forex Trader and an active investing participant in the Stock market, you would be concerned. The Federal Reserve Chairman Mr. Jerome Powell, stated last week on Capital Hill that his agency’s main objective is to keep inflation rate at 2%. An interest rate of 2% is very healthy for the economy because the purchase price of food is stable and proportional to the amount of goods being purchased by consumers. The continuous deviation from the 2% mark is a sure sign of economic instability, an economic state that the Feds is on a mission to prevent.
Therefore, the Feds main focus is to implement monetary policy tools that will in theory, keep inflation at bay if there is the slightest chance that inflation could get out of hand by rising above 2% or falling below it. The Feds do not want US inflation rate to go up too high or go down too low. So, if the Feds notice that the Inflation rate is dropping, which means food prices are dropping, then they will cut interest rates to slow down this fall. On the other hand, if inflation rate begins to rise above 2%, then the Feds will implement changes to the Fed interest rate by raising rates.
Currently, the US dollar is the strongest it’s been for quite some time, which is good for Forex Traders who are bullish on the US dollar, but not so good for stock market traders who are bullish on the S&P. The stock market loves when the US dollar is weak because this means more exports as a result of other countries being able to purchase US-produced goods at a cheaper price.
Therefore, the slightest inkling of a weaker US dollar, bodes well for the S&P 500 and the stock market. This was the main reason why last week when the Fed chairman of the FOMC Jerome Powell hinted that his agency was leaning toward cutting interest rate, the stock market skyrocketed hitting historic highs.
With a strong US dollar, the stock market suffers. This was also one of the reasons why President Donald Trump lashed out at the Feds claiming that the agency was not doing enough to stimulate the economy, condemning the agency for hiking interest rates two times this year, thus stifling the efforts of the US President to stimulate the economy when he championed the passing of legislation which allows huge tax breaks to companies.
A fall in inflation rates is the product of a strong US dollar sporting high interest rates. Under such economic condition, consumers don’t have much money to buy goods and services, so the price of goods and services fall; the stock market falls lower because companies aren’t making sales, no one is buying anything. The unemployment outlook becomes bleaker because there is no company money to pay employees because there are no company sales being made to pay employees, so employees get laid off. The stock market tanks because companies earning statements misses growth forecast or estimates. This is the perfect scenario for a stock market crash and total economic collapse.
The domino effect described above is the reason why the Feds will most likely cut interest rates later this month to make it easier for consumers to borrow money from banks; thus, putting more money in consumers’ pockets. Banks will increase lending when interest rates are low. Consumers will gladly spend money hidden under their mattresses when they are confident that they can get a day job to replenish funds borrowed from their mattresses.
What is coming up for the week? In the week ahead, the US will be releasing retail sales, industrial production, housing data and flash Michigan’s consumer sentiment. All these economic indicators announcements are cable of moving the financial markets, such as the Forex and the stock market. When markets move, money is made.
Elsewhere on the economic calendar, other very important economic announcements include: UK unemployment, wage growth, retail sales and inflation; Eurozone foreign trade; Germany investor morale; China Q2 GDP growth industrial production, retail sales and fixed asset investment; Japan trade balance; and Australia employment figures. So, we can see here that we have a very busy week ahead of us economically speaking.
How does the information above affects EUR/USD Forex traders? The current sentiment states that there is a Fed rate cut on the horizon; and a s a result, the US dollar continues to weaken when compared to other currencies, such as the EUR, JPY, GBP, and AUD to name a few. With this information, Forex traders will buy the EUR/USD pair and this is exactly what is happening as of this writing. This still holds true although the Eurozone is holding on to a zero-interest rate policy. We can see that interest rate decisions or impending decisions move financial markets, whether it be the Forex market or the Stock market.
Mstardom Finance Proprietary Algorithm Update
Sneak Peek at updates about the Mstardom Finance’s EUR/USD Algorithm. Our proprietary algorithm is currently in its beta stage. However, it is still able to give us some insights as to the overall direction of the market. When the algorithm graduates from its beta stage, it will be able to tell the trader/user what price a trade should be executed at. Pretty amazing stuff. The release date of the algorithm will be published as soon as that information becomes available. Until then, please stay tuned in to our weekly articles. If you want to be the first to know about the algorithm’s release date, please send a text of your email address to 631-747-7237, stating: “Please add me to the Mstardom Finance Algorithm Email List.”
Mstardom Finance Algorithm Prediction on EUR/USD: The Mstardom Algorithm is revealing a bullish bias as of this writing (7/14/2019 @6:47pm Eastern Standard Time).
Disclaimer: The above information is meant for research and education purposes only and is not meant as investment advise. Mstardom Finance and its parent company Mstardom, Inc., do not provide investment advice.
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Mr. Glenford S. Robinson is the Chief Executive Officer and Founder of Mstardom Finance. He is the editor-in-chief of News and Magazine article publishing. Mr. Robinson is also the lead developer of the Mstardom Finance Platform at Mstardom.com. He is passionate about quantitative finance and technologies associated with that discipline, such as python-based algorithmic programing. Mr. Robinson is also a Clinical Laboratory Scientist currently practicing laboratory medicine. When Mr. Robinson is not practicing laboratory medicine, writing articles, or studying finance, he is creating mathematical and statistical modules, using quantitative approaches to identify trading opportunities in the Forex and Stock Market.