According to Central Bankers, Era of Ultra-Low Inflation Won’t Return Soon :: InvestMacro

by just forex

Federal Reserve Chairman Jerome Powell reiterated the central bank’s commitment to tighten monetary policy further to reduce inflation as GDP data showed a faster-than-expected decline in quarterly economic growth. Real GDP declined by 1.6% year-on-year in the first quarter of 2022. This situation led to the rise of the US dollar index and the decline of the main indicators. With the stock market closed yesterday, the Dow Jones (US30) was up 0.26%, while the S&P 500 (US500) was down 0.08%. The Nasdaq Tech Index (US100) is down 0.03%.

The US personal consumption expenditures price index, which is part of the indicators tracking the Federal Reserve, will be released today. Analysts expect the PCE index to rise another 0.4%. In other words, experts do not expect a slowdown in inflation.

Stock markets in Europe were trading lower yesterday. Germany’s DAX (DE30) is down 1.73%, France’s CAC 40 (FR40) is down 0.90%, Spain’s IBEX 35 (ES35) is down 1.56%, and Britain’s FTSE 100 (UK100) closed down 0.15% on Wednesday.

European Central Bank President Christine Lagarde said the era of ultra-low inflation that preceded the pandemic is unlikely to return. Speaking at the European Central Bank Forum in Sintra, Portugal, along with US Federal Reserve Chairman Jerome Powell and Bank of England Governor Andrew Bailey, Lagarde added that central banks need to adjust to higher price growth expectations.

This week, a series of data will be released on inflation rates in European countries. The initial level of consumer prices in Germany was 7.6% on an annual basis, down from 7.9% in May. But in Spain, the inflation rate jumped from 8.7% to 10.2% annually.

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Morgan Stanley now expects the eurozone to fall into a mild recession in the fourth quarter of this year and to show a contraction of GDP for the next two quarters before growth resumes in the second quarter of next year, spurred by increased investment.

Expectations that the Eurozone is likely to fall into recession due to energy security problems caused by the war in Ukraine prompted investors to buy the Swiss franc. The Swiss franc rose on Wednesday to a four-month high against the euro as growing fears of a recession in the euro zone prompted investors to seek safe haven assets.

Palladium rose 6.2% yesterday, while nickel rose 9.2% amid British sanctions against Russian billionaire and Nornickel co-owner Vladimir Potanin.

Concerns about a global slowdown continue to weigh on copper and the Australian dollar. Copper has long been known as a barometer for assessing the health of the global economy, and the Australian dollar has a highly positive correlation with copper. If this week’s PMI data is worse than expected, copper may continue to fall.

The Energy Information Administration (EIA) released new crude oil inventory data yesterday. Last week’s report was not published due to server problems. US crude oil inventories have fallen over the past two weeks, falling by 2.8 million barrels. But despite falling inventories amid strong demand, oil prices fell 2% yesterday, as disappointing US GDP data offset negative price sentiment. OPEC+ meets today, so volatility in oil prices will remain high.

Asian markets were trading lower on Wednesday. Japan’s Nikkei 225 (JP225) fell 0.91% yesterday, Hong Kong’s Hang Seng (HK50) ended 1.88% lower, and Australia’s S&P/ASX 200 (AU200) lost 0.94%.

Industrial production in Japan fell 7.2% in May compared to the previous month. Of the 15 industries surveyed, production fell in 13. The auto industry has been hit hard by parts shortages caused by the COVID-19 blockage in Shanghai. Auto production was down 8.0% from the previous month, including a 33.2% drop in truck production.

China’s official PMI is back above 50 levels. It indicates that the Chinese economy improved in June compared to May, but there are signs in the sub-indices that a full recovery will take some time. Headwinds still linger, including a still-stagnant real estate market, declining consumer spending, and fear of any recurring waves of casualties.

S&P 500 (F) (US500) 3818.70 −2.85 (−0.075%)

Dow Jones (US 30) 31,027.92 +80.93 (+0.26%)

DAX (DE40) 13,003.35 −228.47 (−1.73%)

FTSE 100 (UK100) 7,312.32 11.09 (−0.15%)

US dollar index 105.12 +0.61 (+0.59%)

Important events for today:

  • – Japanese Industrial Production (m / m) at 02:50 (GMT +3);
  • – Chinese Manufacturing PMI (m / m) at 04:30 (GMT +3);
  • – Chinese Non-Manufacturing PMI (MoM) at 04:30 (GMT +3);
  • – UK GDP (Quarterly) at 09:00 (GMT +3);
  • – German retail sales in the eurozone (month / month) at 09:00 (GMT + 3);
  • – Swiss Retail Sales (m / m) at 09:30 (GMT +3);
  • – French CPI for the Eurozone (monthly) at 09:45 (GMT +3);
  • – German unemployment rate in the eurozone (month / month) at 10:55 (GMT + 3);
  • – unemployment rate in the euro area (month / month) at 12:00 (GMT + 3);
  • – OPEC + meeting (month / month) at 12:00 (GMT + 3);
  • – US PCE price index (m / m) at 15:30 (GMT + 3);
  • – US Initial Jobless Claims (w/s) at 15:30 (GMT +3);
  • – Canadian GDP (Quarterly) at 15:30 (GMT +3);
  • – US natural gas storage (w/w) at 17:30 (GMT +3).

by just forex

This article reflects a personal opinion and should not be construed as investment advice and/or a continuing offer and/or solicitation to carry out financial transactions and/or guarantee and/or anticipation of future events.

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