Abstract：The United States of America (U.S.A. or USA), commonly called the United States (U.S. or US) or America, is a country primarily located in North America.
The United States of America (U.S.A. or USA), commonly called the United States (U.S. or US) or America, is a country primarily located in North America.
The U.S. is a country of 50 states it covers a wide swath of North America, with Alaska in the northwest and Hawaii extending the nations presence into the Pacific Ocean. Major Atlantic Coast cities are New York, a global finance and heart of cultures and capital Washington, DC. is known for influential architecture and on the west coast, Los Angeles' Hollywood is famed for filmmaking. The larger part of the country can be found in North America, but the United States of America has some regions in the Pacific.
The U.S. has become an economic superpower not just in the West but in the whole world Since its independence from the U.K. on the Fourth of July back in 1776, And Being the worlds largest economy, the U.S. plays a serious role in the global market. Simply about any economic development in the U.S., like rise or fall in consumer spending or an affair by its President, that is made public, could create quite a heavy effect on economies all over the world!
United States: Facts and Figures
Neighbors: Canada, Mexico, Puerto Rico, Cuba
Size: 3,794,101 square miles
Density: 87.4 people per square mile
Capital City: Washington, D.C.
Head of Government: President Joe Biden
Famous Influencers: Kim Kardashian, Charli DAmelio, JennaMarbles, Logan Paul
Currency: U.S. Dollar (USD)
Main Imports: Industrial supplies example (crude oil, etc.), capital goods (computers, telecom tool , automobile parts, office machines, electric power machinery), consumer goods like furniture, toys), and agricultural products and clothing
Main Exports: Capital goods (transistors, aircraft, spares of, telecom equipment), industrial supplies (organic chemicals), consumer goods (automobiles, medicines), agricultural products (soybeans, fruit, corn), Barbies, Xbox consoles, and Apple iPods
Import Partners: China (19%), Canada (14.1%), Mexico (12%), Japan (6.4%), Germany (4.7%)
Export Partners: Canada (18.9%), Mexico (14%), China (7.2%), and Japan (4.5%)
Time Zones: GMT -10, GMT -9, GMT -8, GMT -7, GMT -6, GMT -5
The economy of the United States is a highly developed market economy. It is the world's largest economy by nominal GDP and net wealth and the second-largest by purchasing (PPP) behind China. It had the world's ninth-highest per capita GDP (nominal) and the fifteenth-highest per capita GDP (PPP) in 2021. The U.S. is widely considered to be the richest country in the world, producing about $16.24 trillion in output in 2012. It ranked 13th in 2012 in terms of per capita income – that‘s just the country’s total income divided by its population – of about $51,700 in a year.
The main industries of the United States of America, aircraft, automobiles, transistors, telecom equipment, and other industrial materials. Although it can be seen that the US economy is heavily oriented towards the manufacturing of physical goods, 70% of its results were acquired from the services sector! Talking about trade, one key element of the U.S. economy is that the country is notorious for running larger trade deficits (i.e., the total value of goods flowing into the country is more than the total value of those going out).
The U.S. is a home to the New York Stock Exchange, which is the largest stock trade in the world. It is a home to the world‘s largest bond market, with a market capitalization of over $31 trillion and over $822 billion in bonds traded daily on average. Being the top economy in the world in today’s globalized market, all what happened internally wil provides negative effect to the U.S. also has the potential to affect markets around the world. Even the market of foreign trade.
Monetary & Fiscal Policy
The Federal Reserve sets U.S. monetary policy to promote maximum employment and stable prices in the U.S. economy. It shows concerns on those policies related to the minting & printing of money,
Monetary policy is just the way the Fed controls the availability and production of money in the economy and what makes the Fed special from other central banks is that its aim are based on longer-term effects of its financial policy. The Fed has two main aim. The first one is keeping the prices of consumer goods and services stable and the second one is making sure that there is sustainable economic growth.
Moreover, the Fed just wants to make sure that yo Benjies doesn‘t lose value and yo momma and poppa have jobs!. Within the Fed is the Federal Open Market Committee (FOMC). Currently led by Fed Governor, Jerome Powell, aka “JPOW,” the FOMC is tasked to make sound and rational decisions on financial policy. The FOMC has two main weapons to use in its fight it does against inflation and achieve its long-term aim: open market operations and the Fed’s Funds Rate.
The Feds first line of defense, its open market operations, is the buying or selling of government financial instruments like securities, notes, and bonds. And The Feds Funds Rate is the profit ratio that banks charge each other for overnight loans.
The Banks keep and use these loans to make sure they have enough to meet the Feds reserve demands. These reserves are kept at their local Federal Reserve bank or as cash in their vaults. Then, the one accountable for fiscal policy decisions is the U.S. Treasury. Fiscal policy is the use of government spending or tax imposed to influence the direction of the economy.
In order to encourage business projects, the U.S. Treasury, for example, could choose to lower taxes and to allot more budget on capital infrastructures like highways, schools, broadband, secret military ninja bases, etc. Also, if inflation starts to get out of hand, it could increase tax rates and cut spending.
Getting to Know the USD
The USD (United States dollar) is the official currency of the United States of America. The United States dollar, or U.S. dollar, is made up of 100 cents. It is represented by the symbol $ or US$ to differentiate it from other dollar-based currencies. Also Did you know that the nickname “Buck” for the U.S. dollar is derived from buckskin, which was a common medium of trade at the time when the early American settlers traded with the Indians？
Even after paper currency, the USD replaced buckskin in the barter system, people still choose to the medium of trade as opposite! Check out these forex-related properties of the buck:
Liquidity is my thing!
An broad amount of currency transactions every day involves the USD. Commodities like gold and crude oil are both denominated in dollars. During the Asian session alone, the dollar takes up around 93% of all the currency transactions! But To put this in perspective, take the New York Stock Exchange and the U.S. bond market for example. The value of the companies listed in the NYSE amounts to $28.5 trillion, about 78% of the size of the worlds $36.6 trillion stock markets.
Besides that, for the $82.2 trillion value of the global bond market, the U.S. takes up $31.2 trillion. Every single transaction there, in some way, involves the USD. Hows THAT for liquidity？
The Fed and the U.S. government believe I should remain harder.
The first U.S. dollar (USD) is one of the world's strongest currencies.
Over the past few decades, the Fed and the U.S. Treasury have kept a “strong dollar” policy. They believe that financial and fiscal policy should be geared towards a mighty trade ratio of the USD, as it would benefit the U.S. and the rest of the world.
The currencies of many emerging countries rely on me to determine their value
How many times have you heard the phrase, the dollar is the worlds reserve currency？ Well, the reason behind this is that some countries grade their currencies against the dollar!
When a country does this, the government agrees to buy or sell its currency at a fixed price against the dollar. While the government can increase and decrease the production of money, they are still subject to having the equal amount of dollars in reserve.
This process magnifies the importance of the dollar around the world because this means that some economies depends on the dollar!. When the dollars value were to stage a massive fall, it would produce a wide-reaching negative effect in all the other countries that are pegged their currency on the dollar.
Important Economic Indicators for the USD
Non-farm employment change (NFP) – The NFP employment report measures the change in the number of employed people in the prior month.
GDP – The Gross Domestic Product (GDP) report is the estimate of the countrys total value of all final goods and services.
Retail Sales – The headline retail sales report measures the monthly change in the total value of sales at a retail level. The core version of the report, on the other hand, excludes all sales of vehicles.
Consumer Price Index (CPI) – The CPI measures the change in the prices of a fixed basket of goods and services. The core report did not include food and energy prices because of their volatile nature.
Personal Consumption Expenditure – This is very similar to the CPI report because it measures the price changes of US consumer goods. The reason why you should look at this report is that this is the one that the Fed looks at when making conclusions about financial policy. And we all want to be in cahoots with the experts right？
University of Michigan Consumer Sentiment – Each month, the University of Michigan releases its consumer reviews report.
This index measures the attitude consumers have towards the economy. The more confident consumers are about economic conditions, the more possibly they are to spend.
What Moves the USD？
The Gold Rush
Whenever the dollar is at risk of losing its value due to inflation, investors turn to gold for safety. Unlike most financial properties Gold maintains its intrinsic value. Gold is gold – its the same everywhere! So when gold prices are rising, it could be a sign that the dollar is losing its appeal.
Economic Developments in the U.S.
Constitutionally, positive progress of the economy in the U.S. attract more participants to put your money in the U.S. A stockholder would, surely, need to have some dollars to be able to transact in the U.S. So as the demand for U.S. investments increases, the demand for the greenback rises as well.
Capital Inflows and Outflows
With respect to Japan and London, the U.S. probably has the deepest and most widely financial markets. This provides the many kings, sultans, billionaires, and heirs around the world with many types of investments that they can choose from.
In order to put your money in these American properties or assets, each investors would first need to convert all other currency they are holding into U.S. dollars. The capital inflows and outflows from the U.S. financial markets can have a notable effect on the value of the dollar.
Economic Developments Around the World
Since the USD takes up about the most part of daily currency transactions, just about all major development in the world (i.e. strong GDP growth in Australia, a stock market crash in Beijing, or a Godzilla attack in Tokyo) affects its short-term valuation.
Bond Yield Differentials
With investors always looking for the best trade in for their money, it is important to keep track of the differences in the yields of bonds of the U.S. and other foreign countries.
When an investors see that bond yields are rising in foreign countries while yields in the U.S. are staying in faster or going lower, investors will move their funds out of U.S. bonds (selling their dollars in the process) and begin purchasing foreign bonds.
Rumors on the Interest Rate Grapevine
Market participants pay attention to interest rate, the way it behave and you should too. If the Fed is expected to raise interest rates, this means that demand for dollar-denominated financial properties (like Treasuries) could rise, which would be bullish for the dollar.
If the Fed is expected to cut interest rates, it could lessen demand for these properties and we could see investors move their funds away from the dollar. Since Fed officials usually drop hints about the central bank‘s future interest rate changes, traders are all ears during policymakers’ speeches.
Trading the USD
USD, the Base Currency
USD/XXX is traded in amounts denominated in USD. Standard lot sizes are 100,000 USD and mini lot sizes are 10,000 USD.
The pip value, which is denominated in XXX, is calculated by dividing 1 pip of the USD/XXX, which would be 0.0001 or 0.01 depending on the pair being talked about, by the USD/XXX current rate.
Profit and loss are denominated in XXX. For one std. lot position size, each pip movement is worth 10 XXX. For one mini lot position size, each pip movement is worth 1 XXX.
For example, if one pip is equal to 0.0001 and the current trade rate of USD/XXX is 1.4000, one pip of one std. lot would equate to 14 USD.
Margin calculations are based in US dollars. With leverage of 100:1, 1,000 USD is expected to trade 100,000 USD/CAD.
USD, the Quote Currency
XXX/USD is traded in amounts denominated in XXX. Standard lot sizes are 100,000 XXX and mini lot sizes are 10,000 XXX.
The pip value, which is denominated in US dollars, is calculated by dividing 1 pip of the XXX/USD (0.0001 or 0.01 depending on the pair) by the XXX/USDs current ratio.
Profit and loss are denominated in U.S. dollars.
For one std. lot position size, each pip movement is worth 10 USD.
For one mini lot position size, each pip movement is worth 1 USD.
Margin calculations are based in US dollars. For example, if the current XXX/USD rate is 0.8900 and the leverage is 100:1, 890 USD is expected in available margin to be able to trade on a std. lot of 100,000 XXX.
However, let say when XXX/USD rate has gone higher, a larger available margin in USD is expected. Conversely, the lower the XXX/USD rate is, the less expected available margin is needed.
USD Trading Tactics
So now lets put all these things we just learned and come up with some trade tactics for the USD. Looking at differences in U.S. economic progress economic data from other major economies is a good way to start off trading the USD.
For example, a jump in the US retail sales and ugly results on UKs employment situation report would give you a reason to sell the GBP/USD. The U.S. dollar index or USDX, which tracks the performance of the USD against a fixed basket of currencies, is a great barometer of the strength of the USD. By looking at the U.S. dollar index so often you can find some clues on where the USD is headed.
A USDX that is trending upwards could provide you more confirmation you need to take a short position on the EUR/USD.
Talks of a Fed funds inflation ratio which signals the likelihood higher returns on US properties, can encourage traders to buy up the USD. Well, don‘t get left behind!. Taking care of the Fed’s financial policy outlook, which is usually part of Fed officials speeches, could produce some clues about the direction of the USD.
Observations from Hawkish could serve to be signals to go long on the USD/JPY while dovish comments could serve to short the USD/JPY.
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