US Dollar Exchange: The US Economy is Proving Cloudy

While in Europe rays of optimism are rising, clouds are being gathered again over the U.S. economy. The scene has been reversed completely once again in a period of only two months, when concerns about the high debt of European countries triggered grinding internationally. The latest figures are revealing. In the largest EU economy, Germany, the business climate record is improving dramatically, while the U.S. consumer climate indicator is on a free fall pace. And while the British economy grew in the second quarter to the fastest pace of the last four years, analysts constantly review downward trends in the outlook of the U.S. economy.

It is difficult now to argue that Europe is the “weakest link “in the global recovery, which is reflected in currency markets. The euro slipped after several months, but has now recovered with significant ground against the dollar. U.S. banks Goldman Sachs and Wells Fargo reviewed and elaborated their ratings on the state of the common European currency, following similar moves by the British HSBC and the German Deutsche Bank. Analysts and investors appear instead increasingly anxious about the state of the U.S. currency, which has fallen by 8% from its four year high back in June of this year.
Improving prospects for the European economy and the simultaneous emergence of concerns about the U.S. are back in the spotlight and the transatlantic debate as to when and to what extent should governments cut public spending.

The U.S. considers that the austerity measures endanger the global recovery. However, the Europeans believe it is time to tighten their belts, even noting that the biggest risk to growth is the financial derailment. The latest figures show that the tightening has not yet managed to hit growth. Nevertheless, analysts warn that it is too early to evaluate negative or positive effects of a restrictive fiscal policy.