What is a Recession?
Recession
Forex Trading Glossary
Quick Answer: A recession is a sustained decline in economic activity marked by falling GDP, rising unemployment, and weak demand. It usually leads to easier monetary policy, safe-haven flows, and elevated forex volatility.
What is a Recession?
A recession is a significant, widespread, and prolonged downturn in economic activity. The common rule of thumb is two consecutive quarters of negative GDP growth. Recessions typically feature falling GDP, rising unemployment, and reduced consumer spending, prompting dovish central bank policies.
Recession Indicators
- Negative GDP: Two consecutive quarters of contraction
- Rising unemployment: Job losses across sectors
- Inverted yield curve: Classic predictor
- Falling consumer confidence: Reduced spending
- PMI below 50: Contraction signal
Currency Impact
- Bearish for currency: Economic weakness
- Rate cuts likely: Central bank stimulus
- Safe-haven flows: USD, JPY, CHF strengthen
- Risk-off environment: Emerging market currencies weaken
Related Terms
Learn More About Forex Trading
Now that you understand recession, explore our comprehensive guides: