World economy to shrink
admin | March 20, 2009The head of the Organisation for Economic Cooperation has echoed a statement from the IMF by saying that the world economy will most likely shrink this year. Angel Gurria, head of the body that represents the 30 most industrialised nations, said, “We are probably seeing a world which will go negative.”
Pound Sterling – UK Markets
A report from the Confederation of British Industry claims that demand for UK exports has slid to a new low, despite the 25% fall in the Pound over the past year. The business lobby group said that 51% of firms reported that their export order books were below normal in the past month. It is the lowest level for this measure in a decade. The finding will dash hopes that the weak Pound will help support the UK economy throughout the recession. Meanwhile, expectations for export orders remain close to a 30-year low.
Although UK economic data this week has continued to point to a deep downturn, Sterling has risen against the US Dollar today. The US currency set for its biggest weekly percentage fall since the early 1970s after the Federal Reserve’s shock move this week to buy long-term Treasuries.
US Dollar – US Markets
The House of Representatives have voted in favour of a bill to levy a 90% tax on bonuses over $250,000 from firms bailed out by taxpayers. The move follows outrage over the decision by AIG to award its employees $165m in bonuses after taking $170bn in aid from the government. House Speaker Nancy Pelosi said, “We want our money back and we want our money back now for the taxpayers.”
With the Federal Reserve introducing quantitative easing after the unexpected announcement that it will start buying Treasuries, the Dollar is trading near a two-month low against the Euro, and is heading for a record weekly drop. The US currency is on course for a second weekly decline versus the Yen and both the Australia and New Zealand Dollars are also heading for third weekly gains against their American equivalent.
Euro – European Markets
The EU has said it may double the amount of emergency funding to help members in need of urgent budget support to €50bn. European Commission President Jose Manuel Barroso said he was confident the deal would be reached on the final day of a two-day summit in Brussels.
Spain continues to experience one of the Eurozone’s most pronounced economic downturns, with a Spanish Statistics Institute report showing that Spanish industrial orders fell 30% on the year in January, the biggest drop since 2002 when the country began recording the data. Orders for durable consumer goods dropped 33%, while non-durable consumer goods orders decreased 7.8%.
Other Currencies – Highlights
Asian currencies rose, and are heading for their best week against the US Dollar this year, following optimism that stimulus spending plans will avoid a deeper global recession.
South Korea’s Won and Taiwan’s Dollar rallied after central banks in the US, Japan and the UK announced plans to buy bonds, increasing the supply of Dollars, Yen and Pounds. The MSCI Asia Pacific Index of regional stocks was set for its biggest weekly advance since August 2007 and the cost to protect Asian debt outside Japan fell.
