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June 19, Rancesco Pesole, a foreign exchange strategist at ING Bank, said that the problem now is that the Bank of England decided not to provide any forward guidance. This means that the market needs to interpret the details very carefully to judge the direction of policy or assess the timing of the next interest rate cut. The past month has been quite bad for the UK, with performance below expectations in all aspects, inflation slightly below expectations, and weak economic growth... For the Bank of England, all this seems predictable. The yield curve has not changed much because it basically recognizes the markets expectations, that is, one meeting to keep interest rates unchanged and one meeting to cut interest rates.Bank of England Governor Bailey: The statement that we expect interest rates to gradually fall does not represent a forecast for August.On June 19, David Kelly, chief global strategist at JPMorgan Asset Management, said that the Federal Reserve may keep interest rates unchanged until the end of this year. He pointed out that if inflation is expected to rise due to tariffs, it will not subside until 2026. "By the end of next year, the economy should cool down. Inflation should cool down, and maybe they will give us some lower interest rates." "Now, dont hold your breath for low interest rates from the Federal Reserve, because they dont seem to have any intention of providing low interest rates."Gazprom CEO meets with Hungarian Foreign Minister.On June 19, Nick Rees, head of macro research at Monex, said that the Bank of England still seems to be sticking to the rhythm of cutting interest rates once a quarter. Although some comments have begun to downplay the rate of interest rate cuts originally proposed by Bailey, although this may not be an official statement, it seems to be their plan. The biggest highlight of this meeting was the 6-3 vote difference. This is dovish in the market consensus, and the market will interpret the signal from it, but I think it will have limited impact on the specific actions of the Bank of England in the future.

As China's Inflation Misses Forecasts, NZD/USD Sinks Below 0.6320

Alina Haynes

Feb 10, 2023 11:53

 NZD:USD.png

 

As a result of China's National Bureau of Statistics (NBS) releasing weaker-than-anticipated Consumer Price Index (CPI) (Jan) data, the NZD/USD pair has dropped precipitously below 0.6320. The annual inflation rate is 2.1%, which is below the consensus estimate of 2.2% but above the prior figure of 1.8%. The monthly inflation rate declined by 0.8%, but inflationary pressures rose by 0.7%.

 

China's Producer Price Index (PPI) revealed a 0.8% deflation, which is 0.8% worse than the 0.5% predicted deflation and 0.7% previous deflation. It indicates that enterprises are aggressively discounting their goods and services at the facility gates. This is symptomatic of weak household demand.

 

The Chinese government and the People's Bank of China (PBOC) may pursue expansionary stimulus and monetary policies, respectively, as the Chinese economy recovers following the lifting of economic regulations.

 

There is little doubt that the Chinese economy will experience a rise in inflationary pressures as a result of further stimulus driving commodities in a bullish path. After overcoming the pandemic, western and other Asian nations have witnessed a similar circumstance.

 

Notably, New Zealand is one of China's most important trading partners, and lower inflation will require further assistance, which will benefit the New Zealand Dollar.

 

Meanwhile, the risk mood is negative as investors become anxious in advance of next week's release of Consumer Price Index (CPI) data in the United States. S&P500 futures ended Thursday's session on a negative note, as the market thinks that the Federal Reserve (Fed) will soon hike interest rates. The US Dollar Index (DXY) has difficulty maintaining a value greater than 103.00.

 

Following the release of January's good employment report, an unanticipated rise in inflation cannot be ruled out. Consumer spending can be stimulated by an increase in consumer expenditure, which may occur from a rise in employment.

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