The FOMC meeting minutes indicate that high inflation is taking root. UK political crisis deepens :: InvestMacro

by just forex

Investors looked closely at the Federal Reserve’s latest protocol, which provided new data on the central bank’s monetary policy and the fight against inflation. According to the recent FOMC meeting minutes, the Fed will also raise interest rates by 0.75% at its July meeting. The committee also lowered its growth forecast for the second half of 2022 and 2023. The minutes reflect participants’ concerns that a rate hike will have a “larger-than-expected” impact on economic growth. Participants did not see enough evidence that supply constraints had been relaxed enough to help control inflation.

According to analysts, a 50 basis point rate hike at the July meeting indicates a final rate of 3%, and a 75 basis point increase indicates a peak of 3.25% or 3.5%. At 3.5%, there is a 50% chance of a recession.

The ISM US Services PMI was 55.3 in June, down from 55.9 in May but better than expected at 54 points.

With the stock market closed yesterday, the Dow Jones (US30) was up 0.23%, and the S&P 500 (US500) was up 0.36%. The NASDAQ Technology Index (US100) rose 0.35% on Wednesday. The three indicators ended the day in the green.

Most of the IStock markets in Europe rose yesterday. Germany’s DAX (DE30) rose 1.56%, France’s CAC 40 (FR40) jumped 2.03%, Spain’s IBEX 35 (ES35) fell 0.14%, and Britain’s FTSE 100 (UK100) rose 1.17%.

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More than 35 members of the British government resigned in less than 24 hours. One in five members of Parliament who have held public office has left office. Boris Johnson is ignoring calls to step down despite mass layoffs. “The prime minister’s job is to lead the country through difficult times,” he said. Mr Johnson added that millions voted for him and wondered if any potential successors could replicate his success in the next election. Despite the political problems, BoE chief economist Hugh Bell is confident the BoE will bring inflation back to its 2% target. However, he did not say when that would happen.

All oil and gas fields affected by the strike in the Norwegian oil sector are expected to be fully operational within days. Analysts expect oil prices to recover quickly as supply shortages persist. Goldman Sachs raised its forecast for the price of natural gas, saying that a full restoration of Russian gas supplies via Nord Stream 1 is no longer a likely scenario. On the other hand, Citigroup says that WTI could fall to $65 a barrel by the end of this year and drop to $45 by the end of 2023 if demand declines.

Gold hit a 10-month low on the back of the US Federal Reserve’s hawkish policy, which drove up dollar and government bond yields. According to the minutes of the central bank meeting, the Fed believes that there is a real risk that high inflation will take root in the US economy and that an appropriate increase in interest rates will be the only way to balance rates that are not constrained by growth. In other words, there is no fundamental reason for gold and silver to rise.

Yesterday Asian markets closed lower. Japan’s Nikkei 225 (JP225) fell 1.20% yesterday, Hong Kong’s Hang Seng (HK50) ended 1.22% lower, and Australia’s S&P/ASX 200 (AU200) fell 0.52% on Wednesday.

China’s economy is expected to gradually overcome the negative effects of the epidemic in the second half of this year, as economic indicators show improvement amid a series of supportive policy measures, according to a report issued by the People’s Bank of China. According to the report, employment in the country remains stable despite the problems, and price growth remains in a moderate range, giving the authorities more wiggle room in macroeconomic policy. The report suggests using soft monetary policy to help companies overcome difficulties, expand efficient investment and stabilize growth.

S&P 500 (F) (US500) 3,845.08 +13.69 (+0.36%)

Dow Jones (US 30) 31,037.68 +69.86 (+0.23%)

DAX (DE40) 12,594.52 +193.32 (+1.56%)

FTSE 100 (UK100) 7107.77 +82.30 (+17%)

US dollar index 107.06 +0.53 (+0.50%)

Important events for today:

  • – Unemployment rate in Switzerland (m / m) at 08:45 (GMT + 3);
  • – German industrial production in the eurozone (cubic meters) at 09:00 (GMT + 3);
  • – monetary policy meeting of the European Central Bank in the euro area (month / month) at 14:30 (GMT + 3);
  • – US Non-Farm Employment Change (MoM) at 15:15 (GMT +3);
  • – US Initial Jobless Claims (w/s) at 15:30 (GMT +3);
  • – Canada Ivy PMI (m/m) at 17:00 (GMT +3);
  • – US natural gas storage (w/w) at 17:30 (GMT +3);
  • – US crude oil reserves (w/w) at 18:00 (GMT +3);
  • – US Federal Open Market Committee member Bullard speaking at 20:00 (GMT +3);
  • US FOMC member Waller speaks at 20:00 (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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