It’s been two weeks since English people decided to exit from the European Union. Financial markets, however, have not recovered yet and they continue to move into the spiral of the news coming from England.
With Brexit and its effects on the financial markets, the euro is subdued. The ECB does not intend to act in the short term, but it may also decide to further increase the economic stimulus plan.
Overseas, in the US, the monetary policy is anything but hawk. The external environment does not allow to continue with rate increases and the normalization of monetary policy.
However, it is a fact that the US economy is in far more perfect shape than the Eurozone. The main demonstration has arrived at the end of the week, when the data of Non-farm payrolls were published.
Non Farm payrolls in the month of June recovered from the disappointing data of last month. The new jobs added to the economy are 287.000 in June, against analysts’ forecasts at +175.000 units.
Results below expectations for the indicator of the average hourly wage in the report of the labor market in the US in June. It went down to 0,1%, against the change in the previous month at 0,2%.
The unemployment rate in the United States, in June, rose to 4,9%. Analysts had expected the unemployment rate to 4,8%, compared with the previous month at 4,7%.
This surprised negatively the market showing a rise in the unemployment rate higher than expected.
The data on new jobs added to the US economy in June fed new strength of the US dollar and pushed the euro-dollar exchange rate falling to challenge the support at 1,10.
The single currency accelerated the descent, bringing the euro-dollar exchange rate to score new lows. The euro fell to two-week lows against the dollar.
The pound has fallen by more than half a cent against the dollar at $ 1,2920 after the publication of the US Non Farm payrolls. The price of gold went down.
In reaction to the report on US jobs the dollar touches the 5-week high against the Swiss franc.
Meanwhile, the IMF analysts confirm the fear of the market: the consequences of the Eurozone economy with the Brexit will be relevant.
The International Monetary Fund, in reaction to the latest analysis on the economic outlook of the euro area, has decided to cut forecasts on Eurozone GDP. For the 2016 it was revised downwards by the IMF from 1,6% to 1,4% in 2017, “mainly due to the negative impact of the outcome of the British referendum.”
The IMF warns that inflation expectations remain “very low”, below the medium-term target of the European Central Bank (around 2%).
The medium-term outlook for the euro area according to the Fund is “mediocre, […] with the legacies of the crisis such as high unemployment, high public and private debt, the deep-seated structural weaknesses that weigh on the productivity growth”.
According to the analysis of the IMF, the growth from here to five years of the Eurozone should be about 1,5%, with inflation that could reach a maximum of 1,7%.