In an interview with NBC last night (22/12), IMF director Christine Lagarde said that United States of America has better outlook for 2014. She has good reason for this kind of optimism. Lowered unemployment, the Fed's tapering, and government budget agreement; all of them shows that USA in 2014 will do better. Naturally, better economy means better USD too. Do you think so?

In an interview with NBC last night (22/12), IMF director Christine Lagarde said that United States of America has better outlook for 2014. She has good reason for this kind of optimism. Lowered unemployment, the Fed's tapering, and government budget agreement; all of them shows that USA in 2014 will do better. Naturally, better economy means better USD too. Do you think so?

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Bloomberg's Dollar Spot Exchange Rate for 2013

Silent Holidays
After last week's raucous, the market this week is going to be slowed down considerably. Japanese market is still closed on Monday due to the Emperor's Birthday. Today, Germany are going into holiday to celebrate Christmas Eve. However, at the same day USA will release data on durable goods orders and new house sales.

At 25 December, almost all part of the world are going to celebrate Christmas. Nevertheles, BoJ chief, Haruhiko Kuroda is going to speak at Keidanren (Japan Business Federation). At 26 December, Australia, New Zealand, Europe, and Canada are still closed to observe Boxing Day, but there will be releases from BoJ and the USA (weekly initial jobless claims). High impact releases will reappear again at 27th from Japan and USA to close the year of 2013.

With this kind of outlook, most likely the market will be sideways, with gains and losses up to how good those releases would be.

2014 Politics
On 2014, we could say that USD prospect is equal to that of the US. The Fed have said that they may be willing to do more tapering if unemployment lessens. Tapering opens up the possibility of further strengthening of USD. But this is up to Janet Yellen, who will replace Ben Bernanke as the number one man (or woman) in the Fed. Yellen is the architect behind stimulus, and have said that she will go on with the current policy until there is a 'strong recovery'. Bloomberg mentioned that she seemed not really concerned about the impact of stimulus on asset prices.
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Nonetheless, the most deciding factor will be US politician's fight that could delay the advance of Yellen, or, more than that, sacrifice economic recovery. Even Christine Lagarde have said that Congress has to be 'responsible' and should not threaten economic recovery by further debate on whether the US will honor its obligations or default over its debts on February.

In short, we can't be as sanguine as Lagarde aboout US economy. In actual world, economy may have entered the right path to progress. But just like the 'soft' statistics, so is the current economy.Moreover, as we saw in the shutdown incident, there are more than just statistics on economic indicators. Political squabbles could dragged on to economic field, and the result is not often good. These variables usually has more impact on forex market than long-term economic projection.