Concerns Remain On A Prolonged Recession Prospects

Daily Forex Fundamentals | Written by ecPulse.com | Jul 06 09 13:21 GMT |

A light week is currently starting, leaving behind us a hectic week full with class “A” fundamentals, where the European Central Bank left their benchmark rates at 1.00%, a historic low, considering those rates the most appropriate at the time being. Moreover, the central bank released out details of the 60 billion euro’s plan, which will start taking place today. The bank will start purchasing bonds maturing between three and ten years, as the bonds purchased must be eligible under this program. As a start, the bank will use a minimum of 500 million euro’s, the European Central Bank is currently studying the markets, they won’t inject any further cash unless the situation needed, especially they fear any spur of inflationary pressures in the sixteen nations. The actions taken by the European Central Bank came to follow other policy makers, the endless deterioration which resulted in the first recession sine euro’s inception, is going to take some time to fade away, where the economy will continue to witness further contractions with some projections that it would alter into deflationary threats. What really concern us now are the elevated unemployment rates, according to the estimated readings the jobless rates reached to 9.5% the highest since 1999, where more downturns are projected as we might see this year a breach of 10.0% to rally reaching 11.5% levels in 2011. The eroded profits seen by companies across the sixteen nations was the main reason behind those elevated levels, because companies and financial institutions had to demobilize workers in order to reduce their expenses that escalated surpassing their revenue, especially they have been reporting losses for a long period of time. Moreover, we have another issue known as the falling consumer prices that we won’t really consider heavily because the billion injected in financial markets will be enough to spur inflationary pressures in the upcoming period along with the incline seen to crude prices as it diffuse back some inflationary pressures. According to the flash estimate, consumer prices fell into the negative levels for the first time on record to -0.1% from the previous flat estimate. It is all linked into a closed circle, okay companies are demobilizing workers but those workers are also considered consumers, which mean that narrowed household incomes, more layoffs will continue to anchor spending further more which would eventually cripple the overall growth preventing it from heading into the previously seen wider expansions. Therefore, we can’t hold on a total optimism that an expansion would take place any time soon because the endless downturn will continue to create serious obstacles in on the recovery path, that why projections of an expansion will take place in the second half of 2010. Ecpulse disclaimer: The content of ecPulse.com and any page in the website contain information for investors/traders and is not a recommendation to buy or sell currencies, stocks, gold, silver & energies, nor an offer to buy or sell currencies, stocks, gold, silver & energies. The information provided reflects the writers' opinions that deemed reliable but is not guaranteed as to accuracy or completeness. ecPulse is not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trades currencies, stocks, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, stocks gold, silver &energies presented should be considered speculative with a high degree of volatility and risk