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On October 13, the International Monetary Fund (IMF) warned UK Chancellor of the Exchequer John Healy to use cost-of-living assistance measures "prudently," otherwise facing the risk of renewed inflation. The IMF stated that heavily indebted countries like the UK should limit any relief measures to a "targeted and temporary" scope to avoid increasing the difficulty of curbing price increases. The IMF projects that UK economic growth will be better than previously expected, with an average inflation rate of 3.3% this year and 2.8% in 2027. Meanwhile, the UK is close to achieving its goal of sustainable public finances.On October 13th, the International Monetary Fund (IMF) stated on Tuesday that despite anticipated slowdowns in Japanese economic growth, the Bank of Japan (BOJ) is likely to gradually raise interest rates, bringing them "closer to a neutral level." This policy path is similar to that of other central banks facing inflationary pressures. In its World Economic Outlook report, the IMF stated, "Japans economic growth is projected to slow to 0.7% in 2026, with fiscal support measures partially mitigating the impact of rising energy prices. As the energy shock subsides and monetary policy gradually normalizes, economic growth will stabilize at this level in 2027." Japans economy grew by 1.2% last year, and the IMF projects growth of 0.7% in both 2026 and 2027. The IMF did not name any specific country, but noted that monetary policy can only remain unaware of the direct and short-term indirect effects on inflation if the shock is temporary. The report pointed out that even if the impact of the shock can be temporarily ignored, central banks may still need to raise nominal interest rates to maintain stable real borrowing costs if inflation expectations rise.IMF Chief Economist: Achieving this goal will require a lot of work, but it is crucial for the resilience of the economic recovery.Goldman Sachs: We believe that Russias announced diesel release will have no significant impact on global diesel prices.IMF chief economist: Fiscal space must be restored and supply-side resilience must be rebuilt.

As Fed Chief Powell's Testimony And The US NFP Approach, The Us Dollar Index Nurses Its Wounds Below 105.00

Alina Haynes

Mar 06, 2023 14:42

US Dollar Index.png 

 

US Dollar Index (DXY) consolidates its greatest weekly loss in seven weeks between 104.55 and 104.60 at the start of the crucial week comprising Federal Reserve (Fed) Chairman Jerome Powell's semi-annual Testimony and the US employment report for February. As a consequence, the index of the dollar against the six most important currencies encourages some risk aversion during a sluggish Asian session.

 

However, news from China's National People's Congress (NPC) annual session seems to have recently impacted on the risk profile as the dragon nation anticipates moderate growth of 5.0% for the current year, compared to market forecasts of 6.0%. Global concerns were also raised after the lowest annual Economic growth in decades, which had an effect on sentiment and the NZD/USD exchange rate. Outgoing China Premier Li Keqiang said, "China should support the placid growth of cross-Strait relations and progress the process of China's "peaceful reunion," but also take firm measures to oppose Taiwan independence."

 

It is noteworthy that the DXY suffered the previous week as a result of weaker US statistics and conflicting Fed discussions.

 

The US ISM Services PMI for February was 55.1, compared to 54.5 market estimates and 55.2 market predictions. The Price Paid sub-index of the PMI survey, which measures inflation, decreased to 65.6 in February from 67.8 in January but still exceeded analysts' expectations of 64.5. The New Orders sub-index increased to 62.6 from 60.4, and the Employment Index increased to 54 from 50. Prior to that week, the Conference Board's (CB) Consumer Sentiment survey and January's US Durable Goods Purchases both indicated weakening trends.

 

Raphael Bostic, president of the Federal Reserve Bank of Atlanta, expressed new skepticism regarding the Fed's policy shift, stating that "the central bank could be in a position to pause the current tightening cycle by mid to late summer." On the contrary, San Francisco Federal Reserve Bank President Mary Daly said during the weekend that if data on inflation and the labor market continues to come in hotter than expected, interest rates will need to go higher, and stay there longer, than Fed policymakers projected in December, as reported by Reuters. It should be noted that the US Federal Reserve stated unequivocally in its semi-annual Monetary Policy Report that "Ongoing increases in the Fed funds rate target are essential." According to the article, the Fed is unwaveringly committed to returning inflation to 2%.

 

In response, the yield on 10-year US Treasury bonds rose to its highest level since November 2022, before falling as low as 3.95 percent. By the time of publication, however, S&P 500 Futures had posted minor losses, while Wall Street had closed with profits.

 

Moving on, the statement of Fed Chair Powell, statistics on inflation in China, and reports from the China National People's Congress can all provide short-term guidance for the US Dollar Index. The US employment report for February will then be crucial for DXY traders. If the current losing sequence of US data persists, bolstered by Powell's cautious remarks, the US Dollar could experience additional losses.


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