China posts impressive growth in its Gross Domestic Product

The dollar continued on the downward trend that began over the Easter weekend. Having strengthened as far as 1.1704 against the euro, the parity easily moved above 1.2000 at the beginning of the week. In spite of good economic figures coming from the United States, the dollar fell against most of the main currencies. US bond yields also continued to fall. After climbing to 1.74% on 31 March, the yield on Treasury notes fell to 1.5760% on 15 April. Jerome Powell insisted once again that the Fed will not be increasing its rates until inflation is permanently above 2% and the job market has completely recovered from the pandemic. The market now seems to be getting used to the idea that the Fed will stick to an ultra-accommodative policy for many more months and that rates will not be rising again until next year. And yet, recent economic statistics are encouraging. Last Thursday, the Department of Labor announced that US jobless claims fell during the week of 5 April to 576,000, down from 769,000 the week before. Retail sales advanced nearly 10% in March. It seems households used their stimulus checks to buy cars and electronic devices, among other things, whose sales are up by more than 10%. Inflation has also returned. The consumer price index jumped from 1.7% to 2.6% on an annual basis in March, while inflation, excluding energy and food prices, went from 1.3% to 1.6%.

The pound sterling appreciated strongly with the end of the lockdown. Markets are regaining confidence in the British currency a week after most shops reopened and as the effects of Brexit remain largely unfelt. The pound moved again towards its highs of the year and reached $1.4000 against the dollar, CHF 1.2800 against the franc and £0.8600 against the euro. A sign of some regained confidence, real estate prices are reaching record highs after the stamp duty holiday was extended. The number of properties available and the speed of transactions are at all-time highs.

The SNB received good news as the United States announced it was taking Switzerland off the list of currency manipulators. The Biden administration says it will be closely monitoring the country and observing its interventions in the foreign exchange market because Switzerland continues to meet the three criteria defined by Washington to be included. The report nevertheless states that ‘there is insufficient evidence to make a finding that [Switzerland] manipulates [its] respective exchange rates’. The SNB was satisfied but said it wanted to maintain its presence in the market as long as our currency was ‘highly valued’. The franc rose sharply against the falling dollar but remains stable at 1.1000 against the single currency.

China has posted impressive growth in its Gross Domestic Product, from 6.5% to 18.3% in the first quarter of 2020, but this figure is to be put in context as activity was paralysed last year by the epidemic. These good figures and the weakness of the dollar are benefiting the yuan which, after having flirted with 6.60 in early April, has dropped back below 6.50 yuan per US dollar. The People’s Bank of China (PBOC) has kept its five-year prime rate unchanged at 4.65% and at 3.85% for one year, for the twelfth consecutive month.

The US stock market has gone from one record to the next. The Dow Jones index ended last week with a new session record of 34,256.75 points, with the S&P 500 and the Dow Jones breaking records at the close. Solid economic data, falling yields on Treasuries and the prospect of low rates in the US until at least 2022 are seen as positive signs for the US economy and are boosting shareholder markets. But at the start of the week, the indices turned red. This was particularly felt in Japan where the Nikkei plunged more than 2% this morning after Tokyo and Osaka asked the Japanese government to declare a state of emergency following the resurgence of COVID cases just a few months before the Olympics. The agenda for the coming days will focus on central bank meetings. It starts today with the Bank of Canada, continues tomorrow with the European Central Bank and ends the week on Friday with the Central Bank of Russia.