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Inflation, Recession, and a China-U.S. Crisis—OctaFX Takes a Look

Started by forex4you, Oct 11, 2022, 02:01 am

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Inflation, Recession, and a China-U.S. Crisis--OctaFX Takes a Look

<p class="LO-normal">Pandemics and health crises,
political tensions, war flashpoints popping up, Western sanctions on
significant European and Asian economies, and grave tensions between nuclear
powers all have had their toll on the financial markets worldwide. The rattling
of current affairs and world politics does not seem to seize anytime soon. The
international broker OctaFX expert team is convinced it's time to keep some
accompanying phenomena in mind.</p><p class="LO-normal">Return with a vengeance--inflation</p><p class="LO-normal">Turkey is drowning in an
inflation rate of over 78 per cent. The Australian government agencies expect a
5 per cent inflation rise in 2022. Southeast Asian countries have also
experienced an inflation hike. For example, this July marked a 7-year inflation
rate peak for Indonesia, where the rate surged to 4.9 per cent, surpassing the
central bank forecasts. As of this writing, the United States of America
officially have an annual inflation rate of 8.3 per cent. In June, the rate was
even at 9.1 per cent--a 40-year high from its rates back in 1981-1982.</p><p class="LO-normal">Such growth is significant
since it indicates systemic changes to be established soon, manifesting across
the board and worldwide.</p><p class="LO-normal">There is a down-to-earth aspect
to all of this, as well. How is the ordinary individual supposed to react to
such global processes? The financial and trading expert Gero Azrul gives a
critical edge for investors and traders in this regard: 'Within this
unprecedented economy, we must rely on and deepen our skills--especially with
risk management and sound psychology. In these financial markets, we need to
have confidence in what we can control personally rather than trying to control
external factors.'</p><p class="LO-normal">The two goliaths--correlation between EUR and USD</p><p class="LO-normal">Both national currencies, the
European euro and the U.S. dollar, are world reserve currencies, although the
latter is the undisputed frontrunner. Since 1999 the exchange rate showed the
euro to be stronger than the U.S. dollar. Now the euro weakened to be almost on
par with its American counterpart. The last time the market experienced such a
match was in 2002's fourth quarter, nearly 20 years ago. </p><p class="LO-normal">The U.S. Federal Reserve
(Fed) has been much more explicit in its intentions to combat the rising
inflation than the European Central Bank (ECB). For instance, the Fed started
raising interest rates in March 2022, while the ECB waited for another four
months--until July--to follow suit. One main reason for this crucial disparity in
monetary policymaking and the ECB's reluctance to be hawkish is that higher
rates may provoke a public debt crisis. </p><p class="LO-normal">All the while, the European
proximity to the war in e also had its share in the euro's weak
performance.</p><p class="LO-normal">Many issues caused the euro's
sliding performance against the U.S. dollar: Political upheaval in Italy that
led to a September general election bringing a new centre-right coalition,
farmers' strikes across Europe, and energy and natural gas price hikes.</p><p class="LO-normal">In conclusion, the
macroeconomic environment is not looking good. And inflation is not the only
reason: the <a href="https://www.investopedia.com/terms/p/pmi.asp">Purchasing Managers' Index</a>
(PMI) is constantly dropping, and a significant slowdown of the world economy's
total amount of output produced and supplied in the last quarters is all but
confirmed. It doesn't matter how much the English Wikipedia article's
definition of 'Recession' is <a href="https://fortune.com/2022/07/29/wikipedia-recession-definition-debate-partial-blocking-new-users/">manipulated</a>--a
recession for the U.S. indeed still is.</p><p class="LO-normal">Although recession fears are
also spreading globally, the demand for the safe-haven U.S. dollar remains
somewhat durable--the result is that the Foreign Exchange currency pair EURUSD
keeps pushing lower.</p><p class="LO-normal">It should not go unmentioned
that the British pound sterling has recently plummeted in direct comparison to
the U.S. dollar, as well, mimicking the euro's recent weak performance with a
slight delay and arriving below 1.07 U.S. dollars per currency unit.</p><p class="LO-normal">Are new paradigms on the horizon?</p><p class="LO-normal">In the past weeks, news of
Middle Eastern energy giant Iran applying for the BRICS membership soon arose.
BRICS is a close assembly of the five major emerging economies of the
world--Brazil, , India, China, and South Africa. A few days ago, even
Algeria, which is also rich in natural resources like oil and gas, officially
announced its plans to join the alternative supranational association.</p><p class="LO-normal">BRICS is all the more
interesting because, amidst the world economic trembles felt by most countries,
this year, its members announced a new innovative basket reserve currency for
their global ecosystem of the economic corporation. The currency basket's
content naturally comprises the Brazilian real (BRL), South African rand (ZAR),
n ruble (RUB), Chinese renminbi (CNY), and Indian rupee (INR). This idea
goes back to their first summit in Yekaterinburg in 2009.</p><p class="LO-normal">Just by its mere existence,
this new global reserve currency will contest the U.S. dollar's historical
supremacy as the world reserve currency so far. </p><p class="LO-normal">Furthermore, the 22nd
Shanghai Cooperation Organisation (SCO) summit in Uzbekistan revealed a deeper
and more serious approach to the aspects mentioned above--the list of
participants was only slightly modified, with China again at its helm. With
complete independence from Western preferences, Asian countries like India,
, Kazakhstan, Pakistan, Kyrgyzstan, Tajikistan, and Uzbekistan agreed to
invest trillions and billions of U.S. dollars in infrastructure and trade
projects--realised in the coming years. </p><p class="LO-normal">These efforts for autonomy
are already accompanied by escalating political tensions between Beijing and
Washington, DC, as the visit of the U.S. House of Representatives speaker,
Nancy Pelosi, to Taiwan on 2 August indicated. Beijing saw this diplomatic act
as an apparent breach of the One-China policy the U.S. officially subscribed
to--until lately, at least. Sanctions from China's side and further hostilities
with Taipei and Washington D.C. can be expected.</p><p class="LO-normal">These tectonic movements in
the global financial infrastructure and plain politics will also majorly impact
the Foreign Exchange market--possibly leading to fascinating paradigm shifts.</p><p class="LO-normal">About OctaFX</p><p class="LO-normal"><a href="https://www.octafx.com/?utm_source=media&utm_medium=pr&utm_campaign=EURUSD2&utm_content=ww_fx" target="_blank">OctaFX</a> is a
global broker that has been providing online trading services worldwide since
2011. It offers commission-free access to financial markets and a variety of
services utilised by clients from 150 countries who have opened more than 12
million trading accounts. Free educational webinars, articles, and analytical
and risk management tools the broker provides help traders reach their
investment goals.</p><p class="LO-normal">The company is involved in a comprehensive network of charity and
humanitarian initiatives, including the improvement of educational
infrastructure, short-notice relief projects, and supporting local communities
and small to medium enterprises. </p><p class="LO-normal">In the APAC region, it
managed to capture the 'Decade Of Excellence In Forex Asia 2021' award and the
'Best Forex Broker Malaysia 2022' by Global Banking And Finance Review, World
Finance, and Cfi.Co, respectively.</p>

                This article was written by ForexLive  at forexlive.com.

Source: Inflation, Recession, and a China-U.S. Crisis--OctaFX Takes a Look

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