Looking at a Weaker USD, Higher EUR/USD - BTMU

Looking at a Weaker USD, Higher EUR/USD - BTMU

6 May 2016, 05:55
Roberto Jacobs

Looking at a Weaker USD, Higher EUR/USD - BTMU

Analysts at Bank of Tokyo Mitsubishi explained that a weak start to the calendar year for the US economy, the third in a row, prompted heightened recession concerns which reinforced US dollar weakness as well in the near-term.

Key Quotes:

"A softening of consumer spending combined with drags to growth from net trade, inventories and capital investment weighed heavily on growth in Q1. The lagged impact from the sharp tightening of US financial conditions including the stronger US dollar, the hit to the energy sector from the lower oil price, and weakening global growth are all providing headwinds to growth."

"In contrast, the euro-zone economy has held up better recently particularly early this year when it expanded by an above trend 0.6% in Q1. The recent divergence in growth performance has likely played a role in supporting a modest strengthening of the euro. The euro-zone economy is still benefitting from the lagged impact from a weaker euro, easier credit conditions and looser ECB policy. In addition, fiscal policy had already turned expansionary last year."


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