Delta variant keeps the global economy on edge

Delta variant keeps the global economy on edge

Wall Street is running mixed after weekly US jobless claims hit a two-month high. At the same time, the euro weakens after the ECB’s announcement about the persistence of expansionary monetary policy.

The increase in Covid-19 infections from the emergence of the Delta variant keeps economic recovery processes on a global level in suspenseThe European Central Bank ( ECB ) confirmed its expansionary monetary policy on Thursday, while in the US weekly requests for unemployment assistance reached a two-month high.

In this context, the main Wall Street indices rise timidly after opening the day unevenly; the Dow Jones Industrial Average grows 0.16% and the S&P 500 rises 0.20% 0.35% and the Nasdaq Composite adds 0.3%.

The Labor Department report showed that the number of Americans filing new jobless claims rose by 51,000 to a seasonally adjusted 419,000, the highest level since May.

In spite of everything, it is probable that the data does not imply a material change in the conditions of the labor market and another month of strong growth is expected in July.

“One piece of data is not trending and could likely be related to the Delta variant concern,” said Cliff Hodge of Cornerstone Wealth.

Investors are very attentive to the health of the labor market, on which the Federal Reserve’s monetary policy depends, especially after a series of high inflationary readings that sparked fears about an early end to stimulus as the economy reopens.

Markets Delta Variant

In this framework, the dollar index yields 0.1% to 92.742 units. At the same time, in Europe the euro operates at US $1.1777, close to a three and a half month low after the monetary authority of the “old continent” said that it will keep interest rates low as long as economic activity remains low. pressure from the coronavirus pandemic.

At the same time, the Pandemic Emergency Purchase Program (PEPP), launched in March 2020 in response to the pandemic, will maintain its allocation of 1.85 trillion euros (US $2.18 trillion), destined to the purchase of private debt. and the public to maintain favorable financing conditions.

This program is scheduled to last “at least” until March 2022, and “in any case” until the institution’s board of governors “considers that the coronavirus crisis is over.”

“The recovery of the eurozone economy is on the right track,” declared the president of the European Central Bank, Christine Lagarde at a press conference. “But the pandemic continues to cast a shadow, especially as the Delta variant constitutes a growing source of uncertainty,” he added.

Chancellor Angela Merkel also said Thursday that she was concerned about the “exponential” dynamics of new infections in Germany and urged the population to get vaccinated.

Against this backdrop of uncertainty, the ECB announced two weeks ago that it was raising its inflation target for the first time in 18 years. The new goal is now 2%.

In practice, the monetary authority will not react to deviations above or below the target as long as they remain moderate and temporary, two qualifiers that are already causing disputes over their interpretation.

The ECB maintains its expansionary policy for now because it considers that the recent rise in prices, after years of decline, is temporary and because it expects inflation to return to 1.4% in 2023, far from its target.