The Forex market is currently filled with news regarding China and its economy as well as the effect of China on the global economy. Such a large country with 1.3 billion population is certainly enough of a powerhouse to affect the global situation including the Forex markets. In order to understand how the Forex market is being affected one must first look at the moves China has tried to make in recent months.
Global Economy as a Whole
Last year the Forex market was alight with news that the economy would return to normal. The US and UK would increase interest rates to help stabilize the economy. Quantitative easing would occur as a means of helping increase inflation in Japan. Banks restoration of confidence would help with a credit recovery in the Euro Zone. Now a year later normality for the global economy is not where it should be. It is actually seemingly distance.
The main cause—China. China has enough power to affect the 'headwinds' of normalcy for the global economy. China was hoping to follow in the footsteps of Japan, South Korea and Taiwan. These smaller countries created strengthen for their economy and currency due to export led growth rates. The population increased in income levels. Unfortunately for China their country size is too much for export led growth to have an impact on higher incomes.
It is not to say China hasn't made gains with export growth models when looking from 2007. Their trade surplus rose to 10% based on the GDP with plenty of manufacturing jobs. However, they have credit deficits from the US that created issues. With the bubble bursting in 2008 exporting to the US from China took a big hit and it continues to do so.
China has seen an unbalanced situation in terms of GDP growth. Credit has increased from 2007 at 130% to 2014 at 220%. Approximately 45% of the credit is in real estate and related sectors. While it is good to be owed funds other areas are not doing so well. Property sales are falling. New town constructions where no one was living continue to remain empty with airports and homes that are not being used. Industrial activity is also sliding and commodity prices continue to fall. This undermines the growth of China which affects the global economy.
China has a surplus that is increasing. They are also finding a downturn due to deflationary situations, which has decreased oil prices. While China continues downhill, oil prices will remain decent which actually helps spur the global economy since populations do not have to spend as much at the pumps. Yet as a whole the global economy is being held back from stabilization.
To account for the issues there is now a challenge to end investment phases of development since property is slowing down. It will cost the global economy somewhat to have to deal with China's poor GDP and other economic reports. In fact the global economy may not return to normal even towards the end of 2015.
Forex Discussion Based on China News
China is seeing soft economic numbers, which has affected its currency strength. For those in the Forex trading market looking at Asian currencies this is not a bad thing. The Yuan will see capital flows that are volatile, but on the other hand investors have strengthening currencies in Oceania and Asia including the AUD and Japanese Yen. China's affect on the global economy and its own currency make it clear that a long term investment, such as a month or up to six on an increase to strength for Oceania and Asian currencies against the Chinese currencies which are losing some strength can be the right move.
Also as the Chinese economy suffers, there is still strength being gained in the USD and GBP.
In some ways the news is not looking great, but when you consider how the news ultimately affects the Forex market there is a lot of positive global economic information to make positive investments on.
Volatile versus Steady Trades
To a degree there are going to be short term volatile trades. Anyone looking to make penny trades on a daily basis may have better luck with longer term positions with an increase in size. It is also important to continue watching the economic news for China as well as the global economy to determine where one can invest for maximum profit.
#cherry300x250#As stated above oil prices are currently seeing a decrease, which is translating to the pumps. In some ways this is good and for investors there can be positions on commodities to diversify one's portfolio that make a profit on oil price changes.
While investing in oil, one can also assess the growth, inflation, and commodity reports from China to determine where the stronger positions are going to be found in coming months. A check on quantitative easing is certainly necessary to see where major economies will help strengthen or weaken currencies.
It also needs to be mentioned that while China is having a rather large effect on a stabilized global economy there is also a need to look at monetary policies.
Certain major economies like the US are easing up on their monetary policies, which can put a change into the Forex market. Capital outflows for these countries are gaining power despite trouble with Chinese cross border capital, which tends to be volatile and uncertain according to Forex Regulators like the State Administration of Foreign Exchange.
Overall, China is going to have an effect on the economy. However, if an investor is smart they can reap the rewards in the Forex market based on the ever changed global economy which is influenced by China to a larger degree.
The Forex market according to the State Administration of Foreign Exchange has ample investment opportunities with plenty of liquidity to keep investors happy. A moderate and limited approach may be best though according to reports.