German and Korean Growth Concerns Shake Markets

South Korea’s economy shrank unexpectedly in the first quarter of 2019, cementing the country’s first quarter of loss since the global financial crisis in 2008. The announcement came on Thursday and immediately called into question whether South Korean policymakers would shift to a policy of easy money and whether it would cut interest rates to stimulate growth. The South Korean government had been spending in an effort to support the growth of Q4 2018, but according to the latest reports, the efforts weren’t enough to keep the country’s economic growth stable.

The Bank of Korea attributed the slump to struggles relating to the U.S.-Sino trade war which reduced gains from private consumption, as well as a decline in the memory chips sector. Analysts polled by Reuters had expected a 0.3 percent rise in South Korea’s GDP, but the numbers released on Thursday showed a 0.3 percent decline.

Reports out of Germany on Wednesday also crushed trader optimism, with data showing that German business morale declined in April despite expectations for an improvement. Both the currency markets and the global stock markets were pressured by the data released in the past two days.

The dollar sunk 0.16 percent against the yen on Thursday, trading at 111.98 as of 1:45 p.m. HK/SIN . The yen was supported by an announcement by the Bank of Japan that the central bank would keep its easy money policy for an extended period of time. The decision was not surprising. The dollar index was down 0.10 percent to 98.07 .DXY. The euro was mostly stable in Asia’s early afternoon after suffering its steepest one-day loss on Wednesday since last month. The euro lost nearly 0.4 percent overnight against the yen.

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Stock Market Movements

Japan’s Nikkei 225 was up 0.48 percent on Thursday afternoon, buoyed by the BOJ’s decision, even as most other Asian indexes traded in the red. The Shanghai Composite was down 0.71 percent and the Shenzhen Composite was down 0.95 percent. South Korea’s Kospi eased 0.41 percent and Hong Kong’s Hang Seng Index was 0.07 percent lower. The losses in Asia came after a down day on Wall Street where all three benchmark indexes closed lower after hitting record highs earlier in the week.

Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.