by Oanda’s Alfonso Esparza.
France and Spain published record high unemployment as more people there look at the government for solutions to a prolonged crisis which is not helped by austerity measures. French president Francois Hollande has seen his popularity dropped after the figures came out as there is no clear plan of action from his government. Spain has the highest unemployment rate at 27% and has seen a reduction of its population as immigrant and Spanish nationals exit the country looking for better opportunities abroad.
EUROPE Week in FX
Week in FX Americas – US Economy Grows but Misses Expectations
The U.S. economy grew at an annualized rate of 2.5% in the first quarter of the year. Consumer spending during that time rose at a 3.2% rate but government spending cuts had a negative effect on growth. Analysts had estimated a 3% growth so the shortfall was disappointing for the USD. Due to negative employment indicators in Europe the EUR was not able to capitalize on USD weakness. On the other hand the USD was able to advance versus the JPY as deflation continues to grow and there are questions around the Bank of Japan’s policy being successful in a 2 year timeframe.
AMERICAS Week in FX
Week in FX Asia – USD/JPY Appreciates to 98 as Japanese Deflation Continues
Japanese Prime Minister Shinzo Abe took office in September after promising an end to deflation. He set a very aggressive target of 2% in 2 years. Abe was a vocal critic of the Bank of Japan, whose governor was up for re-election, for not doing enough and his team started making bold statements that took the market by surprise. Fast forward to today and while the JPY has fallen as the result of the doubling of QE measures and aggressive statements deflation continues to grow. Falling prices discourage consumers as they hold off on spending and thus fail to boost economic growth. Japan’s consumer price index fell 0.9 percent making an already tough job tougher still. Kuroda has stood by his inflation target regardless of economic uncertainties domestically and abroad.
ASIA Week in FX