Italy Face a Fifth Contraction, But Trichet Words Remain In Mind...

Daily Forex Fundamentals | Written by ecPulse.com | Aug 07 09 12:35 GMT |

Recession is broaden in Europe's third largest economy, based on the reading released today from the Statistics Office Istat the Italian GDP contracted for the fifth consecutive quarter, as investors and citizens in the Italy remain hesitant, abstaining from spending as they foresee further downturn during their marsh toward finding a recovery. The gloomy fundamentals continue to through out this year as the protracted agony would continue to curb or destruct the economy. The Italian, Gross Domestic Product contraction in the preliminary second quarter reading to 0.5% coming better than the previous deep contraction -2.6% revised to -2.7%, along with the yearly GDP contracted 6.0% inline with the previous. The four leading economies between the sixteen nations were highly exposed to the ongoing turmoil in financial markets, as they were not resilient to the ongoing downturns in financial markets. Government interventions did not restore the long lost confidence especially after the jobless rates was boosted by all this downturn in the sixteen nations, as now the Unemployment rates stand at 9.4% with some projections it would surge higher before the end of the year, where any improvements in this sector in specific wont take place until 2011. It did not really stop at that this week; yesterday we've seen the European Central Bank leave their benchmark unchanged for the third consecutive meeting on the prospect that the current rates are the most appropriate at time being, as the economy is witnessing a slow recovery, with the pace of contractions eased significantly in the manufacturing and services sectors. Even with all the long speech given yesterday, Trichet abstained from giving any comments about deflationary pressures, as nowadays threat of deflation is increasing as prices plummeted heavily down to -0.6%. Trichet said, “Our inflation expectations are inline with avoiding those risks and we will continue to be very alert in this respect”, the bank compared to any other central banks even was the most cautious in handling the inflationary pressures issues, and especially the sixteen nations had faced along the year many issues with hiked consumer prices. Therefore, they did not expand their measures, preventing from any spur of consumer prices in the periods to come, as markets project a rise in crude prices to dampen economies activity further more. On the volatility seen to the commodities, he also added that the situation seen the increase in commodity prices is too complex due to the supply and demand, along with other factors that manage to influence prices, as a some sense of improvements and recovery made the crude oil to breach $73 per barrel in the prior month. Unlike other Central Banks, the ECB is purchasing the long-term covered bonds but there main concern remain heading toward the exit strategy to be used at the time signs of recovery starts appearing clearly. Therefore, the chairman said “they are not in a situation where the instruments we have utilized are complicated and would hamper an exit strategy. We can rest this weekend after we saw the European Central Bank held their stance yesterday, spreading hopes of improvements next year. Ecpulse disclaimer: The content of ecPulse.com and any page in the website contain information for investors/traders and is not a recommendation to buy or sell currencies, stocks, gold, silver & energies, nor an offer to buy or sell currencies, stocks, gold, silver & energies. The information provided reflects the writers' opinions that deemed reliable but is not guaranteed as to accuracy or completeness. ecPulse is not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trades currencies, stocks, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, stocks gold, silver &energies presented should be considered speculative with a high degree of volatility and risk