On Wednesday, the US labor department released the second reading of the GDP growth. The data showed that the economy rose by 4.2% in the quarter, which was better than the expected 4.0%. It was also better than the 4.1% released a month ago. This was a positive data for the American economy, which has continued to strengthen under the Trump administration. The peoples’ confidence level of the economy was also at an 18-year high according to a survey by the Conference Board. Recent data have painted a picture of an improving economy. The unemployment rate is at 3.9%, wages are rising, the participation rate is rising, and the number of people making jobless claims has fallen. This has led to a strong dollar as the Fed has continued to raise interest rates.
Early this week, news emerged that the US had secured a trade deal with Mexico. This was a good news for the market participants who were afraid that the Trump administration would exit from the NAFTA agreement. The isolation of Canada and a Friday deadline led to frantic and hasty arrangements by Canada. The foreign minister, who was traveling to Europe canceled her plans and rushed to Washington. Today, investors are hoping that a deal between the three North American countries will be reached.
On Thursday, Donald Trump had a press interview with Bloomberg. In the interview, he said that the US was likely to exit from the World Trade Organization (WTO, which he said was a bad deal. Exiting the WTO would be the biggest economic threat in the world because of its central role in trade disputes. Experts believe that it would be a bad policy for Americans. For example, if a country imposed large tariffs on American goods and the US is not a member of WTO, it would be difficult for it to arbitrate. Its only option would be to issue retaliatory tariffs, which would make American goods less competitive.
The emerging markets were another focus for the markets this week. It all started when the Argentinian president made a press conference to reassure the markets about the country’s ability to pay the debt. He also asked the IMF to accelerate the release of the $50 billion bailout money. This was after the Argentinian peso had seven days of straight losses. This led to a sharp decline of the Argentinian peso, which is at an all-time low against the dollar. Traders are now fearing that the problems in the Emerging Markets are likely to increase, which will lead to contagion.
