Financial Reform and Forex Analysis

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by: bsullivan
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Date: Mon, 20 Sep 2010 Time: 10:05 PM
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On July 16, 2010, the most sweeping financial reform of our lifetime was enacted. After a year of political infighting, the congress finally reached an agreement and passed the bill. Now the federal government must find ways to implement the changes. Bankers across the country are seeking ways right now to get around the new laws, and surely they will. In the end how will all this impact forex analysis and trading? Ultimately the financial reform will do little to impact forex markets or trading. Forex markets are international and largely unregulated, local law has little to do with the trading of currencies. The danger to forex markets is the undermining of the U.S. economy and in turn the global economy.

What does Financial Reform mean for Forex Markets?

The bill establishes an independent consumer bureau within the Federal Reserve. This bureau is meant to protect borrowers from the predatory lending practices that helped cause the world financial crisis. The new bill also allows the federal government to seize and shut down large and troubled financial institutions such as Bear Stearns. Furthermore, a council of federal regulators will oversee the financial system, watching for threats. The federal government has no authority over forex markets so they will not be affected.

Forex Trading and the Economy

The reform does little to aid in the rebuilding of the U.S. or global community and leans heavily on tax payer support. Under the new laws, the riskier investments that fueled the collapse will be most affected. Derivative instruments such as options, reits and sivs will now be subject to federal oversight. Shareholders will also gain new rights into how corporate executives are paid.

President Obama says we must, "Protect consumers and lay the foundations for a stronger and safer financial system, one that is innovative, creative, competitive and far less prone to panic and collapse."

Ultimately, there is no direct impact on forex trading. The risks to forex are in the valuation of the dollar. While the government continues to print more money to prop up the ailing economy, the value of the dollar comes into question, making forex analysis very tricky.

The bill was sponsored by Senator Dodd (D-Conn) and Representative Barney Frank (D-Mass). Senator Dodd says, "More than anything else, my goal was, from the very beginning, to create a structure and architecture reflective of the 21st century in which we live, but also one that would rebuild that trust and confidence."

The bill is criticized by liberals and conservatives alike. The former feel as though the bill just isn't aggressive enough. Liberals wanted to alter the structure of Wall Street and bring more government agencies into the picture. Conservatives argue that the bill creates a larger and more invasive government. The conservatives also feel the bill fails to protect the taxpayers from future corporate bail outs.

What Now?

The global markets, stock, bond and forex are all caught up in the "fear" cycle of trading and investing. Daily news events are causing wild swings in the valuations of currencies. The best way to handle this is with a toolbox of quality investing aids. Muhammad Hafeez, of ForexEgg.com, says, "It takes a variety of tools to get good forex analysis; you cannot rely on just one. He recommends at least a trending tool such as their Price Analysis Tool and a volatility tool, such as their Temperature Charts. Using these tools together with current events is the best way to successfully trade forex markets. "

For more information visit: http://forexegg.com

About the Author

Tommy Hughes is a successful and largely self taught economy watcher and market speculator. He has extensive knowledge of risk management and asset allocation, stock and options trading as well as market analysis. Tommy has worked in the fast paced restaurant industry for over 15 years. Tommy also writes for food publications such as Becket Media's "Grilled" Magazine. Tommy enjoys mountain biking and brewing beer. Tommy lives in the Asheville, North Carolina.
For more information visit: http://forexegg.com