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The United States released its gross domestic product for the second-quarter on Friday. Data showed the United States economy slowing to a rate of 1.5 percent. This growth rate is in line with the expectations of top economists. During the first quarter of the year, growth in the United States was up 2.4 percent.
After the release of the United States GDP figures, the Dow Jones jumped up 188 points to 13,076. This marks its highest level since May of 2012. The United States stock markets and currency was also aided by the French President Francois Hollande and German Chancellor Angela. They made a joint statement confirming their support of the euro and willingness to keep Europe’s joint currency together.
The Commerce Department in the United States believes that the economic slowdown is caused by a drop in consumer spending. During the last quarter, the United States increased the amount of imports brought into the nation while simultaneously dropping the amount of government spending. These factors were balanced out partially by an increase in private inventory investment. With all of the new data coming out of the Commerce Department, the White House has dropped it growth forecast for 2012 from 2.7 percent to 2.3 percent. If the economy in the United States continues to be weak, there is a higher possibility that the Federal Reserve Bank may conduct new quantitative easing measures.
Asian Currencies Drop
Amid reports of a worsening global economic slowdown, many Asian currencies dropped during the last week. Investors are shying away from currencies traditionally viewed as risky and parking their money in safe havens. For the third week in a row, the Indonesia rupiah dropped. It fell 0.2 percent during the week of trading to settle at 9,742 against the United States dollar.
The New Taiwan dollar also suffered its largest fall for the last eight weeks. Over the last week, the new Taiwan dollar dropped 0.4 percent to NT$30.10. South Korea managed to climb slightly against the greenback despite reports of the second quarter GDP representing their slowest growth for nearly three years.
Trading during the last week saw Malaysia’s ringgit fall 0.1 percent to settle at 3.1548 against the United States dollar. The Indian rupee held fairly stable at 55.53 versus the greenback. In the Philippines, the peso managed a rally for the second day in a row. The central bank in the Philippines dropped its overnight rate 0.25 points to 3.75 percent. This decision by policymakers spurred investor confidence enough to result in 0.5 percent rally on Friday. For the entire week, the peso still stands at a 0.1 percent loss against the United States dollar. By the end of Friday’s trading session, the peso stood at 41.908. The peso is up 4.5 percent for the year.
China’s Profits Fall
For the last month, industrial profits in China dropped 1.7 percent from last year. This marks the third month of declines in industrial profits and led to the yuan dropping to 6.3807. On Wednesday, China’s currency reached 6.3967. This marks the weakest level for the yuan since September 29, 2011.
Canadian’s Wary Over New Spending
Retail sales in Canada dropped 0.3 percent for the month of May. Since last November, retail sales have generally been flat. Canadian consumers are increasingly concerned over the record levels of household debt held by consumers. Credit growth has dropped to recessionary levels as consumers try to cut back on expenses. For Canada, the consumer trend toward debt reduction will help aid the country in the next few years. With lower levels of debt, the nation is less likely to suffer from a large debt crisis in the future and has a lower level of risk.
Next Week’s Outlook: New Data
On August 1, the United States will be releasing their manufacturing index. Economists expect this report to show a rebound from the weak numbers reported for June. A strong showing on the manufacturing index could be a sign of an economic turnaround for the US. The Federal Open Market Committee will also release a report on the nation’s interest rate on the same day. The current rate is at zero to 0.25 percent and most market analysts expect this to hold steady. Two days later, the United States will release their nonfarm payrolls report. In June, unemployment stood at 8.2 percent with 80,000 new applicants. Most analysts believe that unemployment applications will jump to 97,000 for the month of July.