Another factor introduced this week would cripple the euro area growth along with the world’s GDP, the protracted Credit Crisis and the continuous weakening demand was not enough to hammer the world expansion. The pandemic Swine Flu diffused from one continent to the other reaching to Spain, United Kingdom and maybe Germany.
This Crisis came to increase pressures, the ECB predicted previously a 2.9% contraction in their GDP reading, yet the International Monterey Fund said last week that 4.9% contraction would take place. Yet this pandemic disease would now result in augmenting the pressures and reduce spending further to push the region into a deeper contraction.
The protracted Credit Crisis pushed unemployment rates to 8.5% where the construction sector in both Germany and Spain stood behind those surging rates, especially after their housing boom altered and transformed into their doom. It did not stop at the housing sector but the turbulence stalled the manufacturing and services sectors. The level of outside shipment from Germany to foreign economies weakened heavily pushing them into their worst economic slowdown since World War II.
Organizations across the globe are projecting the worse, some say spending activity will weaken further because citizens will no longer head toward shopping malls nor consider flying around because concerns on catching the disease are large.
Nevertheless, all those are just projections no real data are coming on the surface that this flu would create this turbulence, so lets keep our concentration heading toward the zone fundamentals at the time being and whether the ECB members will reach to a final verdict of whether they will expand their measures or not next month.
According to projections the ECB will be reducing their benchmark down by 25 basis points to reach another record low at 1.00%, some members are with cutting their benchmark rates deeper because they fear the spread of deflation in the area, in particular Trichet said recently that consumer prices would fluctuate heading deeper into negative levels temporarily.
Even with the dissent, we can notice that all members have faith in the European Central Bank because they proved between rivals that taking actions on a slower pace would bolster the economy.
Due to the Swine Flu and Capital Concerns the European indices fell into the red zone, Dow Jones euro stoxx fell 2.38% reaching 2262.06 levels, the French CAC 40 lost 2.22% reaching 3033.70 levels and the German DAX fell 2.55% reaching 4573.74 levels.
source :ecpulse,action forex.com
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