Dollar Crumbles as Obama Fails to Win Any Friends with State of Union Speech

The U.S. Dollar fell against themajor currencies after President Obama, during his State of the Union address,failed to convince executives and economists that he’s serious aboutcontrolling the U.S.budget deficit.

The U.S. Dollar fell against themajor currencies after President Obama, during his State of the Union address,failed to convince executives and economists that he’s serious aboutcontrolling the U.S.budget deficit.

Although Obama did propose a partialfreeze on government spending, many participants at the economic summit in Davos, Switzerlandstill felt the U.S.is lagging their foreign counterparts in cutting a record budget deficit ofmore than $1.2 trillion.

The opinions on Obama’s speechranged from “There is an unwillingness to deal with the real gorilla in theroom” according to Martin Sorrell, chief executive officer of advertiser WPPPlc to “We need a heck of a lot more action on it” and that Obama’s speech“lacked details” from James Turley, CEO of Ernst & Young LLP.

The major criticism is that therecord budget deficit is one of the biggest risks to global economic growth. Asit stands, the U.S.budget deficit is almost double the average in the Euro region. Borrowing costsover the past year have surged leading many experts to conclude that the budgetdeficit is unsustainable.

Obama’s speech did nothing toimprove its image that the U.S.is seen as “an outlier” to the other Group of Seven nations. The generalperception remains that the U.S.is not making budget slashing a priority. Some critics feel it is acting toslow in trying to control a government that continues to spend more money thanit receives from taxes.

The dilemma that Obama faces istrying to balance a budget while protecting economic growth and increasingemployment. Europe and the U.K.,on the other hand, are cutting their deficits because they feel that aburgeoning deficit will hurt their economies and trigger high interest rates.It is understandable why Obama may be hesitating in slashing spending after itwas reported that fiscal austerity may have been responsible for curtailingeconomic growth in the U.K.during the last quarter.

What it comes down to is that the U.S.may be facing a crisis in confidence that leads to sharply higher interestrates within the next two years according to a poll taken by Bloomberg.Although only 43% of respondents grade this occurrence as moderate, 18% viewedthe risk as large while 28% saw it as limited.

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James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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