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Fitch: Budget performance is expected to be mixed in 2026-2027, with a weaker outlook for Ukrainian cities closer to the front lines.Fitch: As the war continues, cities across Ukraine are facing increasing budgetary pressures.On October 16th, Commerzbank analyst Thu Lan Nguyen stated in a report that although recent positive UK economic data has boosted market expectations for a Bank of England interest rate hike, fiscal risks in the UK could still be a negative factor for the pound. UK economic growth data for August exceeded market expectations for the fourth consecutive month. Nguyen pointed out that the resilience shown by the UK economy provides room for further interest rate hikes by the Bank of England and also eases the pressure on Chancellor of the Exchequer Healy. Healy remains committed to advancing the deficit reduction target when the budget is announced on October 28th. However, Nguyen warned, "Given the experience of the past few years, the potential risks that still exist in the UKs fiscal plan should not be underestimated."According to Interfax news agency, Russian Foreign Minister Sergey Lavrov will visit Iran on October 19 and Bahrain on October 18.On October 16th, Rahul Anand, head of the IMFs Japan mission, stated on Friday that the IMF expects the Bank of Japan to raise interest rates once more, bringing the policy rate closer to the neutral level. However, given increased global uncertainty, subsequent monetary policy adjustments should remain flexible. Currently, the Bank of Japan is gradually moving towards its neutral interest rate level. The IMF continues to estimate Japans neutral interest rate range at 1.1% to 2.2%, with a median estimate of approximately 1.5%. The Bank of Japans current policy rate of 1.25% is already within this estimated range. Anand anticipates that inflationary pressures in Japan will persist as energy prices remain high and businesses more frequently pass on cost increases to consumers. He expects Japans inflation rate to rise above 2% and gradually return to that level by the end of 2027.

Focus on US inflation as US Dollar Index fights to hold around 20-year high of over 108.00

Alina Haynes

Jul 13, 2022 10:54

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The US Dollar Index (DXY), which oscillates close to the greatest levels in two decades, which were attained the day before, illustrates the market's nervousness prior to substantial US inflation data. As a result, the dollar index versus the six most important currencies regains recent losses and defends the 108.00 level, remaining at 108.16 during Wednesday's Asian session.

 

The White House (WH) statement and subpar US data contributed to the DXY's decline from the previous day's multi-year high. In a memo, the White House said that "US economic statistics, notably the June jobs report, are inconsistent with a recession in the first or second quarters," according to Reuters on Tuesday. The news helped the market book profits ahead of crucial data and events.

 

Additionally, in June, the US NFIB Business Optimism Index registered 89.5 vs. 93.1, its lowest reading since early 2013.

 

It should be noted, though, that the most recent economic projections from the International Monetary Fund (IMF) seem to have reignited market concerns and increased demand for the US dollar. The IMF lowers its US GDP growth prediction for 2022 from 2.9 percent in late June to 2.3 percent as a result of fresh US data. The issues of growing inflation and the significant Federal Reserve interest rate increases necessary to control prices were highlighted by the Fund's inclusion of the new estimates in the entirety of its annual assessment of the U.S. economy, according to Reuters.

 

Concerns about a viral variant spreading to Shanghai and causing a lockdown in Wugang, Henan Province, came from China at the same time.

 

The main obstacle to the DXY's movements is probably the market's anxiety ahead of the critical US CPI for June, which is expected to increase to 8.8 percent YoY from 8.6 percent YoY. Prior to the announcement of the inflation data, Thomas Barkin, president of the Federal Reserve Bank of Richmond, said, "There is a road to lower inflation, but a recession is possible."

 

Despite the brief recovery, Wall Street benchmarks ended in the red as 10-year US Treasury rates fell for the second day in a row, to about 2.97 percent. Additionally, Wednesday's opening of the S&P 500 Futures shows minor increases.

 

Future DXY traders will need access to US inflation data, but they may also find fun in news from China and speculations surrounding Russia. DXY may experience more increases if the US CPI shows a favorable surprise.


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