The Euro currency is again testing key support lines, as markets are waiting for the ECB's decision at the beginning of May. Another rate cut is possible, although not probable. Members are dissenting over the measures to adopt. As a result, unorthodox incentives are still an alternative, while the rate cycle is moving closer to an end.
Stabilization is possible for the U.S. economy
The state of the economy remains critical in the U.S., but there is increasingly evidence that the combination of lower rates/strong government interventions are starting to produce some tangible effects. As an example, after having picked up at 674,000 in February, jobless claims declined for the third consecutive week and fell by 8.0% to 610,000 (650,000 expected) from 663,000 the previous week. In effect, last week's Beige Book release underlined a more positive outlook, albeit it also indicated that consumer activity remains weak. Retail spending fell 1.1% (+0.3% expected) in March after having increased 0.3% in February. However, the moderation of the economic slowdown was confirmed by various Fed members, including Mr. Bernanke, although the economic process could remain weak for the first part of 2009. A worsening of the conditions in mining and manufacturing pushed the industrial production down 1.5% month on month in March, while the capacity utilization fell to 69.3%, which corresponds to a new all time low.
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