The dollar is at its lowest level against major world currencies in over two months Thursday after disappointingly weak growth data for the first quarter forced the world into a more sober assessment of the outlook for the economy.
Figures Wednesday showing that gross domestic product grew by only 0.2% in the first quarter were just the latest in a slew of data suggesting that the recovery has weakened in recent months, and have led markets to push back their expectations for the Federal Reserve’s first hike in interest rates since the financial crisis. (Interestingly, the Fed didn’t appear to share that opinion, saying that the slowdown was due largely to “transitory factors” and insisting that a moderate recovery would continue.)
The euro hit an eight-week high of $1.1248 early Monday after reports suggesting that Greece and the rest of the Eurozone are edging closer to an agreement on keeping the debt-laden country afloat for another couple of months. It got another boost from fresh research by the European Central Bank suggesting that the Eurozone’s brush with deflation is over. In a bulletin, the ECB noted that the market’s expectations of medium-term inflation five years into the future had bottomed in January and clearly bounced since it announced its program of quantitative easing. Eurostat said meanwhile that the annual rate of inflation probably ticked up to 0% from -0.1% in April.
There was more good news for the euro elsewhere: the German economy continued to create jobs in April, and Spain, the biggest of the currency union’s bailout recipients in the wake of the crisis, reported its economy grew a thumping 0.9% in the first quarter. That’s the fastest rate in over seven years.
Those data follow figures Wednesday from the ECB showing the fastest rate of credit growth in three years, notably in countries such as Italy and Spain which have been starved of credit since the crisis.
Faster growth (along with the discouraging example set by its sister party Syriza in Greece) is now starting to eat into support for the radical anti-establishment Podemos party, which many had earlier tipped to take power in elections later this year.
Weighing against that were an unexpected rise in joblessness in Italy, the region’s third-largest economy, and a shock decline in consumer spending in France.
