Every Friday the Current rounds up the biggest business stories of the week. This week; the UK , US, EU and Canada hold interest rates, China sets more modest growth goals, the Loonie and greenback surge against the Euro, the US economy rallies, Pebble raises $1 million in 30 minutes, house prices in Toronto skyrocket, and the Ukranian hryvnia plummets.
China sets growth target at 7%
The world’s second largest economy has set a growth target of 7% for 2015, down 0.5% from last year – which was China’s slowest growth in 24 years. 7% is a modest rate of growth in comparison the China’s explosive growth of the 2000’s, but is part of a deliberate strategy of slower and steadier growth. Neighbouring economies including Japan, Australia and South East Asian countries will likely also feel the impact of China’s deliberate slowdown.
Loonie and USD Trade Well Against Euro
The Loonie is trading at its strongest against the euro since June of 2013 – great news for investors, transatlantic business and holiday makers. Meanwhile the greenback hit an 11 year high against the euro until the single currency improved slightly.
Joblessness fell to a 6.5 year low of 5.5% last month down from 5.7% in January. This exceeded the 5.6% rate which was predicted. Average hourly earning have also increased by 2% over the last year. The USD hit an 11.5 year high prompting speculation that the Fed could raise interest rates. The news also caused the price of gold to fall by more than $12. Prior to the release of employment figures Janet Yellen, the Fed’s chairwoman, indicated that interest rates will likely be raised this year. Yellen’s statement pushed the Dow Jones, NASDAQ and London’s FTSE100 to record highs not seen since the late 90’s and early 2000’s.
The Bank of England has held interest rates at a record low of 0.5% for the last six years. Rates were first dropped in 2009 in an attempt to jumpstart the stalling UK economy in the wake of the credit crunch. Inflation is predicted to remain low thanks to the drop in the price of oil and could turn negative.
The ECB has increased its growth prediction for the EU from 1%-1.5% during 2015. Mario Draghi, head of the ECB forecasts a steady increase in growth until it reaches 2.1% in 2017. The bank also confirmed that it will hold its interest rate at 0.05% and elaborated on the quantitative easing strategy it announced in January. €60bn of assets will be bought back per month by the bank until a target of €1.1 trillion is reached in September 2016 – and possibly beyond. In response to the announcement the euro did not make any significant movements, but should the predicted growth and QE pan out as expected then the euro should begin to rise. Retail sales are up 1.1% in January from December in what is now the 4th straight month of retail sales growth in the EU. The figures are also up 3.7% from last January.
Canadian Interest Rates Hold
The Bank of Canada announced that it will not cut interest rates but instead maintain a rate of 0.75%. The bank had previously shocked the economy with a snapshot rate cut that caught investors by surprise. The next update on interest rates will be delivered by the Bank of Canada on April 15th. The bank also suggested that the effects of the recent oil shock did not affect the 4th quarter of 2014 but will be felt in the 1st quarter of 2015.
The average Toronto home now costs over 1m
Buying a home in Canada’s largest city is now more expensive than ever with the cost of a detached home now averaging over $1million. Housing costs in Toronto are up 8.8% since last year to an average of $1,040,018. The average price for the GTA is up 7.8% to $596,163. The number of new listings in the GTA is down 8.7% so constricted supply could be the main culprit behind the price rise. The condo market meanwhile experienced a more modest growth rate of 2.4% to $355 623.
Ukraine’s central bank hiked interest rates from 19.5% to 30% in order to curb inflation. The hryvnia, Ukraine’s currency has lost 80% of its value since last April when an armed insurgency backed by Russia thrust the country into civil war. Ukraine’s economy is set to shrink by 5.5% in 2015 and inflation is likely to surpass the 25% mark.
Smartwatch developer Pebble raised $1million in just 30 minutes on Kickstarter – a crowdfunding website – for their latest model. In April and May of 2012 Pebble raised an astonishing $10.3 million and has already sold over a million smartwatches.
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