Global economic conditions have been in the dumps, and the downward movement has driven markets down with it. However, the global market got a boost on Friday as the Bank of Japan made a surprise decision to stimulate its economy in a big way. Today, we'll talk about the movements made by the Bank of Japan, how it affected global markets, what we can expect to see moving forward, and how binary options traders can take advantage of the trends.
The Bank of Japan Surprises The World!
The economic conditions in Japan haven't been doing very well at all as of late. While the Bank of Japan has made several moves to stimulate economic conditions, their attempts have failed. On Friday however, the Bank of Japan surprised the world by enacting a very aggressive stimulus strategy. The new strategy is to reduce interest rates further, pushing it into negative territory. In fact, the BoJ has made the decision to set its deposit rate at 0.1%, meaning that deposits will actually cost money. This is great news because with banks having to pay for deposits, they will be more likely to adopt a more aggressive lending strategy. After all, banks would rather make money from loans than lose money from deposits. This means that it will be easier for Japanese consumers to get loans and that consumers are more likely to start spending money!
How The Market Reacted To The News
Because global market conditions depend on global economic conditions, the market reacted in an incredibly way. The Hang Seng, Dow Jones, S&P 500, NASDAQ, CAC 40 and several other indices around the world ended the day in the green.
What We Can Expect To See Moving Forward
Moving forward, I have a relatively mixed opinion of what we can expect to see from the global market. In the short term, investor excitement as a result of the Bank of Japan's decision to reduce rates into negative territory will likely send markets upward. However, it's also important to consider the fact that Japan isn't the only economy that's struggling, and while it is a big economy, it's not the largest one that's struggling either. With China, Europe, and several other countries around the world struggling, the fact that the BoJ stimulated economic conditions is positive, but not positive enough to change conditions globally. Also, it's important to take the value of oil into account. With oil still in crisis mode and Iranian oil starting to add to the supply glut, energy companies are likely to feel the pain, putting pressure on the energy sector and therefore, the market as a whole. So, while the short term looks positive, the long term outlook is relatively grim.
How Binary Options Traders Can Take Advantage Of The Trends
As binary options traders, it is our job to predict market movements. In this particular case, the job becomes relatively simple. In the short term, investor excitement with regard to the BoJ will likely send markets upward. So, traders should purchase call options in order to take advantage of the upward movement. However, watch closely, excitement is an emotion, and emotions fade. When the excitement fades and investors start paying close attention to fundamentals, more declines are likely on the way. So, when the market starts to take a turn for the worse, it's time to start trading put options to ride the trends down to the profits. Keep an eye on the latest financial news.
What Do You Think?
Where do you think global markets are headed and why? Let us know your opinion in the comments below!
[Image Courtesy of Wikipedia]