Recession in Russia

Russia has the tendency to slide into recession due to government’s failure in facilitating economic investments to withstand sanctions by the US and European Union.

This was revealed by ex-finance minister Alexei Kudrin who is a staunch backer of liberal reforms. He is the only one bold enough to give reservations about economic policies since the crisis in the Ukraine.

Kudrin anticipates the economy to decline in 2014 and deteriorate. Growth can be negative by next year which is less than government projections for an annual 0.5 percent growth this year. In fact, the economy may plunge by another three to four percent.

Russia has been entangled in a web of high inflation that has also stalled growth. The Russian Central Bank increased costs of borrowing thrice this year. It has singled out demographics as the long-term hindrance to the economy since the start of the second quarter following meetings to bring up interest rates.

On the other hand, the government’s forecast is that the $2 trillion financial system will get bigger 0.5 percent in 2014 after a 1.3 percent increase last year. This is quite far from the average of seven percent from 2000 until 2008. The possibility of a recession has gone up from 50 to 65 percent.

The medium-term goal of four percent by the central bank will anchor expectations of price increases and build the condition for savings and investment.

UK GBP versus USD and EUR - forex tradingThe UK currency was stable against the Euro and US Dollar regardless of the very unpredictable trading during the previous week.

The UK to Euro exchange rate was below the 1.26 level probably because of apprehensions brought about by the Scottish issue that weighed heavily on price movements of the Pound Sterling.

Meanwhile, GBP/EUR traded at 0.08 percent at 1.2536. This came from a high of 1.2683.

These movements back and forth between the two currencies are down from speculative trading from various highs and lows as traders continue to take profit while the referendum controls trading markets.

UK pound to dollar rate is negative 0.16 percent which is lower at 1.62322 GBP to USD.

Dollar to Euro conversion is positive 0.17 percent which is higher at 0.77297.

The recent poll showed that more than 50 percent of Scots choose to separate from the UK on September 18.
Many market traders project this week to be unstable for the pound.

On the other hand, the US dollar will be another volatile currency due to the forthcoming Federal Reserve policy meet. The FOMC is projected to verify US economy’s positive performance. It focuses on interest rates and present position on future fiscal policies.

Update on Aussie Dollars

Last Tuesday, following the result of minutes of the Reserve Bank of Australia for September, the Aussie dollars jumped suggesting a house rapid price primarily focused on policy.

AUD/USD was trading at 0.9047 but it went up by 0.21%; at first the USD/JPY was stronger going from to 106.99, but it later went down to 0.17%.

Governor Haruhiko Kuroda of the Bank of Japan is scheduled to speak to Osaka business leaders and hold a news conference showing rate from 1645 to 1715 (0745 to 0815 GMT). The dollar overnight was trading mixed to higher versus most major currencies while it supported by expectations upbeating the statement of Fed Reserve policy expected to be out this week.

Fed Reserve will announce its recent monetary policy statement this Wednesday, as well as expectations for the CB of U.S. to reduce its monthly bond-buying program from $25 B to $15 B giving the dollar support on Monday as it awaits an upbeat take on the U.S. economy.

Investors were also expecting to find a timetable for the U.S. interest rates to rise although a mixture of U.S. data trimmed the greenback’s gains.

Fed Reserve Bank of N.Y. reported that the condition of its general business index has increased this month to a five-year high of 27.5 from 14.7 last August. But analysts are still expecting the index to rise to 16.0 this month.

Uncertainty on Worldwide FOREX Policy - forex trading systemThe suggestion to restructure the FX market by developing a central platform may not succeed following the misgivings raised by industry stakeholders regarding the format’s practicality.

A good number of banking institutions and lobby groups have been at odds regarding compliance with regulatory agencies.

This has something to do with the idea of building an international platform to complement the process of fixing orders. It could hinder competition and innovation as well as produce risks and increase prices.
A central utility will generate huge single point-of-failure hazards, according to an industry umbrella organisation. This was in answer to its reaction to proposed policies contained in a particular consultation paper of the Financial Stability Board.

The Deutsche Bank believes that regulatory support for the infrastructure may be disadvantageous to potential solutions, risk management and competitive pricing. The bank is among the largest dealers in the $5.3 trillion daily global foreign exchange market.

The plan is part of the 15 preliminary recommendations on reform that came from the umbrella regulatory group in July. It came after reports and accusations of fixing in the FOREX market. The FSB says creation of a utility to handle fixing orders from all over the world will bring down the ability for manipulation.
It belittles the bank’s role in daily rate manipulation determined by averaging price orders of different market-makers.

Reactions to the FSB indicate support for the central order matching scheme among certain companies and lobbyists such as ANZ, NAB and Commerz Bank while other respondents put emphasis more on technical hurdles.