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The single currency will continue to be dragged by a stronger Canadian Dollar. Added to the pressure was a comment from the National Bank of Canada that the central bank, Bank of Canada (BOC), will not need to cut rates on tomorrow’s interest rate decision meeting. An interest rate cut by the Federal Reserves, U.S. central bank, has called for its Canadian counterpart to do the same. The comments by the National Bank of Canada came from its Financial Deputy Chief Economist Matthieu Arseneau who noted that Canada outperforms other “disappointing” major economies, including the United States, China, and the Eurozone. The European Union’s largest economy, Germany, said it is considering outlawing negative interest rate. In a world of negative interest rates, forcing rates on short-dated debt to zero would keep the yield curve permanently inverted.
Swiss Franc outshined the Euro currency by 5.62% since its recent high last April 2019. The European economy is suffering amid the slowing global economic growth, particularly in the European region, and the escalating U.S.-China trade war. In addition, EU’s largest economy, Germany, might experience recession for the first time in more than a decade with its manufacturing sector slowing down after its demand was hit by the trade war and the Brexit. 47% of Germany’s GDP is made up of manufacturing, which in terms of share of an economy was four (4) times as much as the U.S. On the other hand, Switzerland is optimistic about the post-Brexit EU. Switzerland is a member of the EFTA (European Free Trade Agreement), which are composed of non-EU European countries and the United Kingdom might possibly join, boosting the group’s influence.
The economic powerhouse is shifting from the West to the East. Leading to this shift is Japan who recently published reports that its economy expanded for third consecutive quarter in the second quarter of 2019 supported by solid consumer spending and capital expenditure, though its pace slowed from the previous quarter amid sluggish exports. The latest GDP data is widely viewed as one of the most important economic indicators ahead on an increase in the consumption tax rate from 8 percent to 10 percent scheduled for October, a move that could dampen consumer spending and hurt the economy. New Zealand on August made a surprising move to cut its benchmark interest rate and expressed the possibility of a negative interest rate to protect its economy. The New Zealand Dollar was the weakest among Group of 10 major currencies.
Singapore cut its economic growth forecast to -1% for 2019 during the second quarter, on a flat economic performance in the first half of the year. The Ministry of Trade and Industry had already trimmed its growth expectations once this year, in May 2019, when it lowered the forecast to 1.5 percent, a steep slowdown against the full-year GDP growth of 3.1 percent in 2018. The quarterly economic data has also continued to soundly disappoint. The latest downgrade came as the MTI affirmed its flash estimate for second quarter GDP growth of 0.1 percent. The data spelled for a looming recession in Singapore. In addition, Singapore is heavily reliant on exports and China is its biggest trading partner. The Chinese economy is growing at its lowest pace in 27 years amid the ongoing trade tension between the country and the United States.