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Headlines: Forex scandal, Japan and India grow…

In Business and Currency by Continental StaffLeave a Comment

Every week we round up the biggest business stories from around the world. This week: the US economy shrinks, Britain deflates, Japan’s stock market skyrockets, the big banks are back in trouble, Americas house building industry rallies and India outpaces China but do the numbers add up?

US Economy Shrinks

The US economy shrunk in the first quarter of 2015 by 0.7%. Harsh winter conditions are partially to blame as consumer spending, which makes up 70% of US economic activity, dropped by 1.8%. The strong value of the US dollar has also lowered exports and raised imports. Interest rates – which influence exchange rates – will likely remain stable.

Forex scandal

Barclays, Citigroup, JPMorgan, RBC and other major international banks have been fined $5 billion for rigging foreign exchange rates. The scam involved traders colluding to manipulate forex rates via online communication. The manipulation only involved short timeframes and did not have long term effects on the forex market. However this is not the first time that traders at large banks have been implicated in similar illegal market manipulation. UBS, which was fined $324 million in this latest case was previously fined $205million for its role in the LIBOR scandal.

Japan Grows

Japan’s economy grew 2.4% in the first quarter of 2015. Exports and consumer consumption were strong, but stockpiling inventory in anticipation of continuing consumer demand proved to be the biggest boost. Japan’s Nikkei stock market index hit its highest level since April of 2000.

Britain Deflates

Britain finally fell into deflation in April, as the consumer price index fell by 0.1% compared to last year. Despite falling well short of the 2% inflation rate that was targeted, the British government is staving off concern by insisting that the drop in consumer prices will be a welcome relief to shoppers. However if deflation worsens then the Bank of England will likely be forced to consider measures to boost the economy and possibly devalue the pound.

Construction Boom

America’s house building industry saw a phenomenal 20% increase in April compared to March. The rise is the largest since 1991, and is already being felt in other parts of the economy. Home Depot’s profits are up by 14% year on year.

India expands under Modi

India’s economy grew by 7.5% in the first quarter of 2015, outpacing regional rival China. India’s Prime Minister Modi has vowed that this will be India’s century and has aimed to make a number of reforms to India’s economy. Supporters may point to the recent strong growth as signs that Modi’s prophecy will be fulfilled. Critics, however, have argued that the strong growth figures have more to do with the adoption of a new method of tracking growth than of Modi’s policies. Modi has also sought to strengthen ties to China, a country whose economic revolution in the last 20 years he seeks to emulate. Some are urging the Reserve Bank of India to lower rates to boost growth further.

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