Obama Faces Unprecedented Financial Crisis

US president elect Barack Obama faces an unprecedented global financial crisis and how he addresses the situation may well define his presidency for years to come. Obama faces a national debt in the trillions and his appointees will be charged with overseeing the massive $700 billion dollar bailout program. The actions of the new administration will affect the entire global economy including the interbank Forex market that is responsible for trading over 2 trillion dollars daily.

World Banks Cooperate

The nature of the interbank Forex market can make it difficult to regulate but the global financial crisis has prompted unprecedented cooperation between central banks in Europe, Asia, and the US. According to the “Wall Street Journal Europe” (February 2006), 73% of total interbank Forex volume is done through 10 banks. These banks are names that we all know well, and include Deutsche Bank, UBS, Citigroup and HSBC.

World Leaders Await New Treasury Secretary

World leaders are eagerly awaiting the announcement of a new Treasury Secretary and are hoping that Obama will be capable of guiding the international community through the crisis. Former Domestic Policy Advisor to President Bill Clinton, William Galston stated; “The need for a seamless transition is greater than it has been in our adult political lifetime. With two wars abroad and an international financial crisis going on, there cannot be a period in which the new administration is just getting up to speed.”

European Economic Situation Deteriorating

European banks reported weak earnings and the economic situation is Europe continues to deteriorate. In an attempt to stimulate their economy Germany’s cabinet on Wednesday agreed on a 50 billion euro ($64.22 billion) stimulus package for Europe’s largest economy. In an extremely gloomy prediction Marc Chandler, global head of currency strategy at Brown Brothers Harriman stated; “The forces at work in the global capital markets are very big, bigger than who gets elected president of the United States. People should be prepared for a deep economic downturn in the U.S…”

Dollar Remains Reserve Currency

The dollar is still the world’s reserve currency in interbank Forex and commodity markets and is likely to remain so in the foreseeable future. In a rare piece of good news it was reported that interbank lending costs continued to fall on Wednesday with the rate for three-month dollar funds hitting its lowest level in almost four years. It is hoped that the Obama victory will return investor confident to markets including the interbank Forex.