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It has a feeling of crunch time for the ECB as Thursdays rate decision approaches…the pressure is certainly mounting for the ECB to not only cut interest rates but to introduce additional measures to revive the economies in the euro zone. Today we have already seen two data snaps that will pile the pressure on the ECB; Euro zone inflation has hit a record low in March dropping to 0.6% from 1.2% in Feb- a sharper fall than expected. Unemployment in Germany rose to 8.6% in March from 8.5% in Feb; unemployment is on the rise throughout Europe with the Spanish jobless now over 14%. In addition the Irish credit rating has been cut by S&P from AAA to AA+ with the possibility of further downgrading on the cards. So will the ECB still not commit to aggressive action? Joerg Kraemer, Commerzbanks chief economist last week predicted that the German economy could contract by up to 7%…Trichet has strongly hinted that rates will be cut but also noted that low rates have “drawbacks” and are not appropriate for Europe…a bold statement given that Spain is showing deflationary signals and in the light of today’s euro zone inflation data….
Overnight the US dollar has lost ground against the pound and the euro- the dollar failed to break through key support against the euro in the 1.31 area- a weaker day in equities yesterday helped the USD to firm- later today we see consumer confidence data from the US.
The Yen has come under pressure in recent sessions with dreadful economic data and sentiment undermining the Yen as a safe have currency. Jobless rates in Japan have risen to a 3 year high and February’s exports halved- it is also anticipated that business confidence data released overnight will slump to a 30 year low.
Discuss on this on the Currency Exchange Forum
March 31, 2009 @ 1:29 pm
House prices dropping in Spain by more than 5% in 2008 (and more than 10% in “second hand” homes) as per data released by the INE in Spain today. Unemployment rate above 14%. First bank nationalised this week. Stagflation. U shapped recession, maybe leading to L shaped recession
If we see EUR weakining in the coming months, great time to buy property in EUROPE?!?!?!
March 31, 2009 @ 1:47 pm
Dear Phil. Agree with you. The Bank of Spain has been estimated that if one considers the level of coverage similar to the European average in arrears (around 50%), the fund would cover the losses associated with bad debt ratio at around 4% now in environment of 3% -. From this ratio, banks and will have to pull your own results. And those who say ’stress test’ made up to now (stress test) is that the benefits of a year could cover bad debt ratios of 7%. But if you add three-quarters of the benefits of two consecutive years of losses from bad debt ratios to reach 9%.
Is that scenario likely? In this difficult context, there is a rare consensus. The worst is to come. And not just because of growth in delinquencies, but also because banks and, to the aggravation of economic activity and the ability of households and firms, have restricted the maximum lending. Something that obviously undermines the economic, but also the financial system itself, which has opened an impressive network of offices whose employees do not have a credit placed in the mouth.