The US Dollar had a mixed performance during the week. A strong start against the Euro and Sterling in the first 2 days was followed by a weaker pace as the week came to a close. The Sterling pound started at 1.4678 then weakened during the first 2 days reaching the 1.45 levels before rallying back to 1.4921, up 1.6% for the week. The Euro opened the week at the 1.3242 level, slumped progressively to a low of 1.2965 on Tuesday before recovering back to close at 1.3173 on Friday. The Japanese Yen was stronger during the week but then weakened to a close of 99.11, giving away the previous two-weeks gains.
Swine Flu Pandemic
The emergence of the swine flu during the weekend grabbed the attention from the current economic crisis. After confirmed and suspected cases around the world, authorities reacted immediately in an effort to avoid public panic and overreaction. Among the reactions, the US president sought an extra $1.5bn from Congress on Tuesday as the US sharply stepped up its response to the growing spread of swine flu from Mexico around the world. The markets still reacted adversely to the threat of a pandemic. The impact on the equity and currency markets was cautiously mixed on Monday and Tuesday before investors focused back on the usual financial events.
Economy Shrinking By 6.1%
The preliminary figures from the commerce department showed that the US GDP was down at worse-than expected annualized rate of 6.1% during the first quarter of the year. This figure comes after the reported 6.3% decline in the fourth quarter of last year. The main drag on the GDP during this quarter was the business investment; on the other hand, the consumer spending and the trade balance showed upward movements, while government spending eased during the first quarter of the year.
Fed Keeps Rates at 0.00% - 0.25%
The Federal Reserve said at its Wednesday meeting that the pace of deterioration in the US economy appeared to be slowing, but indicated that it would keep interest rates exceptionally low for an extended period. Regarding the previously announced $1.15 trillion purchase of securities, the Fed said it would “evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets”.
Obama: Fighting For The Economy
After his first 100 days in office, president Obama outlined that his economic recovery plan has already saved or created 150,000 jobs. He later criticized hedge funds for blocking an out-of-court restructuring of Chrylser’s $6.9bn debt; the carmaker had filed for Chapter 11 bankruptcy protection on Thursday. The Obama administration declared that the carmaker would emerge from a “surgical” bankruptcy process with more government aid and new shareholders, including the Italian Fiat. On another note, the Congress passed, on Wednesday, Obama’s $3.4 trillion budget resolution, proposed earlier in March.
Economic Indicators: Confidence Picking Up
Consumer confidence made a surprising 12 points jump in April to 39.2, the highest reading since November. The University of Michigan Consumer Confidence also came at 65.1, up from the previous 61.9 level. The S&P/Case-Shiller Composite 20 index, which tracks the house prices in 20 metropolitan US markets, showed an 18.63% annual decline. The ISM manufacturing, which tracks the manufacturing activity, came at 40.1 for the month of April versus the expected figure of 38.4 and a previous month level of 36.3.
Europe
Unemployment Still High
Europe’s unemployment rate rose to a 3-year high, reaching 8.9% in March, the highest since November 2005. Unemployment in Germany and Ireland reached 8.3% and 11.4% respectively while Spain announced 2 weeks ago a disastrous 17.4% figure. In France, the number of job seekers jumped to 2.45 million, thus increasing the likelihood of reaching the 3-million threshold in the coming quarters.
Economic Confidence Rebounds While Inflation Stabilizes
European confidence in the economic outlook increased for the first time in 11 months in April as inflation stabilized and governments remained boosting spending to combat recession. The Eurozone confidence index in the 16 nations rose to 67.2 from a previous level of 64.6. In parallel, consumer prices in the Eurozone showed stabilization in inflation at 0.6%. The same trend was observed in Italy and Germany where consumer prices remained unchanged in April. Finally, the French Producer Price Index fell again by 0.4% in March.
Germany slashes 2009 growth forecast
The German government said on Wednesday that the economy would shrink by 6% this year, making it one of the worst performing large economies. This new forecast is a move down from the previous expectations of a 2.25% contraction, underlining the impact the global downturn on Germany’s export-reliant economy.
United Kingdom
Mixed Economic Indicators
UK consumer confidence climbed to the highest level in a year during April, seen as an additional sign of a milder-than-feared recession. The index tracking the consumer sentiment rose 3 points to -27 after a previous figure of -30 for March. Economic data showed a pick up in April retail sales as per the CBI employers’ group while PMI manufacturing index rose to 42.9, up from March’s 39.1 level and above the expected figure 40.0. Finally, the closely-watched Nationwide House Price Index recorded a 0.4% drop in April after the positive figure in March.
Japan
Bank Of Japan’s Downbeat Outlook
The Bank of Japan said on Thursday it expected the economy to contract more this year and prices to fall further than it forecast just two months ago. Officials said that the “Economic conditions in Japan have deteriorated significantly” and lowered the forecast to a 3.1% contraction in the economy during this fiscal year ending next March. The previously expectations were for a 2% contraction.
Surprise Japanese Output Gain
Japan’s industrial production grew by 1.6% month-on-month, thus recording twice the expected pace. This result lifted the market sentiment, sending the Nikkei 225 index up in the second half of the week.
Edging Back Into Deflation, Jobless Rate Rise
Japan has edged back into deflation for the first time in more than a year, as March figures showed a 0.3% year-on-year decline in prices. On the other hand, unemployment rose to 4.8% in March, adding to the deep recession fears in the world’s second economy despite the positive industrial production figures.
Kuwait
Dinar at 0.29120
The USD/KWD opened at 0.29120 on Sunday morning, following the Dollar performance during the week.
Rates
03-May-09 Spot Rate One Week Range 3-Month
Currencies Closing Rate Minimum Maximum Forward
EUR 1.3273 1.3150 1.3516 1.3265
GBP 1.4921 1.4680 1.5430 1.4920
JPY 99.11 97.50 100.75 98.95
CHF 1.1359 1.1165 1.1770 1.1340
