The US dollar slumped on Thursday having shown the lowest daily drop for a month after the American lawmakers approved a bill on Wednesday evening which recovered government work and increased national debt limit. Unemployment Claims also turned out worse than expected. The pound growth was supported by retail sales data which exceeded the forecast. Business Confidence rose in Australia and Consumer one – in New Zealand.
The US technical default was managed to be prevented but the attention of the markets is shifted towards the damage made by the shutdown and also towards the fact that the Fed will have to put off the start of QE3 tapering off for a later period. Government shutdown caused a serious damage to economy, said President Obama.
FOMC member Evans said on Thursday that the Federal Reserve would probably keep stimulating for some time considering the lack of macroeconomic data for the estimate of economic state. FOMC member Fisher said that the Fed was not likely to taper QE3 at the nearest meeting on October 29-30.
The leaders of BlackRock and PIMCO investment funds believe that the Federal Reserve could put off asset purchase reduction till June, 2014 to support the economy after the political crisis. The expenditure for the US government recovery may turn out higher than the losses caused by a temporary shutdown - say the analysts polled by Bloomberg.
According to the Standard and Poor's, temporary government shutdown will lead to the US GDP decrease in the 4th quarter of this year by 0.6% and will cause serious negative consequences on consumer confidence. Bloomberg Consumer Sentiment fell to its low last week for almost two years. Americans became more pessimistic in estimating economic outlook amid aroused concerns that the political opposition could do harm to the economy.
China's credit rating agency Dagong has downgraded the U.S. rating from A to A- with a negative forecast. Although this step is rather symbolic – they say that the Fitch is going to follow Dagong soon. At the same time Moody's agency announced that the decrease of the US credit rating in the nearest 2 years was unlikely.
Meanwhile, Philadelphia Fed Manufacturing Index turned out slightly better than forecasted (15 p.) and dropped in October to 19.8 p. in comparison with 22.3 p. in September. At the same time the US Unemployment Claims fell less than expected last week – by 15 thousand to 358 thousand against the expected decrease to 335 thousand.
The euro reached 8.5-month high Vs the dollar and the pound – almost 2-week. The UK retail sales rose in September by 0.6% against the expected growth by 0.4%. At an annual rate retail sales rose by 2.2% last month in comparison with the growth by 2.1% in August and the forecast of +2.0%. Retail sales growth for the third quarter accounted for 1.5% q/q – it is the highest quarterly growth from the first quarter of 2008.
Retail Sales Change in the UK and the USA (m/m)
Australian and New Zealand dollar continued growing and updated the heights of October on Thursday. NAB Quarterly Business Confidence rose to +3 in the third quarter compared with -1 in the second quarter – and reached the highest level for two years. ANZ Consumer Confidence Index rose by 2.9% in October to 122.3 p. in comparison with 118.8 p. in September. According to the Westpac report for the nearest 10 years on New Zealand economy, a stable growth will continue till 2015 and will start slowing down only in the second part of the decade.