The "Currency War" Reflects The Increase In World Economic Variables.

For the two consecutive day, the governments and central banks of two western countries have adopted strength one after another.

Analysts pointed out that Switzerland and Japan openly intervene in the foreign exchange market, suppress the excessive appreciation of their currencies, and protect their exports and the economy.

From a global perspective, the frequent intervention in foreign exchange markets also reflects the emergence of new variables in the current world economic growth, coupled with the continued ferment of the sovereign debt crisis in Europe and the United States, causing all kinds of risky assets to continue to fall, and the corresponding hedging currencies such as the Swiss Franc and the yen are sought after.

There are signs that the central banks headed by the Federal Reserve are facing the pressure of postponing policy tightening and even further easing loose monetary policy in the face of the threat of the two global bottom.

American and European economies reappear

Before the intervention of the Swiss and Japanese authorities, the recent two traditional hedge currencies, the Swiss franc and the yen, continued to grow significantly.

In contrast, high risk assets such as stocks and commodities continued to plummet and stocks fell for another eight days.

The industry believes that behind the sharp fall in the stock market and the rise of the risk taking currencies is the increase in the uncertainty of world economic recovery, especially in major economies such as the US and Europe.

With the dispute over the debt ceiling between the White House and Congress at the beginning of this week, the us temporarily avoided the "catastrophic" breach.

But at the same time, it also allows investors to have more energy to chew up the latest release of a series of bad US economic data.

Last Friday's report showed that the initial growth rate of GDP in the US in the second quarter was only 1.3%, far below market expectations.

This week, the US Manufacturing Purchasing Managers Index (PMI), consumer spending in June, PMI in service industries and factory orders issued a weak signal in July. The number of layoffs in July increased by 60%.

A series of weak economic indicators have led many Wall Street firms to downgrade their outlook on the US economy.

JP Morgan announced on the 4 day that the US GDP growth slowed down to 1 percentage points to 1.5% in the third quarter.

Feroli, chief economist at the bank, said high unemployment and weak consumption were the main reasons for the expected downgrade.

Nomura also announced this week that it will reduce the US economic growth rate from the previous 3.3% to 2.5% in the third quarter.

Barclays Capital announced on the 1 day that the US economy's growth forecast for this year will be reduced from 2.5% to 1.7%.

It should be noted that the new economic alert is not only in the US, but also in the euro area of another big economy. The PMI of the manufacturing industry released this week also hit a low level in the past two years.

debt

While discussing the economic difficulties, another factor that has been plaguing the developed economies can not be overlooked - the sovereign debt problem.

Although the United States finally raised its debt ceiling in time, the country still faces downgrade threats.

The Obama administration failed to win the applause of the United States at the last minute to "turn the tide" and avoid the US default.

But after this storm, the US's performance in managing the financial sector has attracted many criticisms.

Riley, rating agency Fitch's sovereign credit rating officer, said in an interview 4 days ago that although the US president signed the debt raising bill, the agency could still reduce the 3A's highest debt rating in the medium term.

Riley said that the United States still has very difficult choices in terms of Taxation and government expenditure.

Moodie, another rating agency, continued to set the outlook for the US rating as "negative", that is, the rating could still be lowered in the next one or two years.

At the moment, the outside world has cast its eyes on the S & P, which has previously said that if the agreement reached by the United States does not contain significant deficit reduction, 50% of the next three months will reduce the US rating.

S & P believes that the "major" deficit reduction is as high as 4 trillion, while Obama's plan is only 2 trillion and 100 billion. Under this standard, S & P is likely to lower the US rating.

In Europe, the new round of debt crisis assistance reached in July 21st does not seem to be the ultimate salvation of the euro zone. Recently, great powers such as Spain and Italy have fallen into debt crisis.

Yields on both countries soared to a record high of 6%, approaching 7% of the risk.

Before that, Greece, Ireland and other countries were forced to seek assistance after the yield of treasury bonds reached 7%.

QE comes back

Another background for Japan and Switzerland to intervene in the foreign exchange market is the weakness of the dollar itself, which is also closely related to the fundamentals of the US.

With the deterioration of the economic environment, the recent speculation of the United States on the launch of the new stimulus policy is also rising again.

Whitney, a well-known analyst at Wall Street, said the US economy has seen two signs of bottom finding.

"Bond king" gross expects that Bernanke may give a hint of QE3 at the Fed's annual meeting at Jackson Holzer later this month.

Federal Reserve Chairman Bernanke said at a congressional hearing in July that if the economy stagnates, the Fed may take new actions, including the start of the third round of treasury bond purchase plan.

New York Times reported on Tuesday that the recent debate over the debt ceiling by the US government and Congress has directly weakened the flexibility of US fiscal policy in the coming period, and pushed the heavy responsibility of stimulating the economy in difficult times to the Federal Reserve.

Cohen, vice chairman of the Federal Reserve, said on Wednesday that if the US economy is weaker than expected and the inflation rate is falling, the Fed may need to seriously consider further easing.

According to the Wall Street journal, Blaine, the former head of monetary affairs of the US Federal Reserve, also expressed support for buying more bonds to stimulate the economy.