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On September 19th, the United States warned its allies that deliveries of some key weapons could be delayed by up to five years due to the significant depletion of its own munitions stockpiled during the war with Iran. Several officials stated that orders for Tomahawk cruise missiles and the Tefeng long-range launch system from European countries like Germany are facing delays due to insufficient US stockpiles, and some Eastern European countries reliant on US weapons are also affected. The US military consumed a large amount of advanced munitions during the war with Iran, including more than half of its advanced Patriot interceptor missiles, about one-third of its Tomahawk missiles, and nearly half of its precision-guided missiles and THAAD interceptor stockpile. The Pentagon acknowledged that the large-scale use of munitions exposed strategic stockpile shortages and bottlenecks in military production capacity. Currently, US defense contractors are expanding production capacity, with Lockheed Martin planning to increase the annual production of PAC-3 Patriot missiles. Meanwhile, Ukraine urgently needs more Patriot air defense interceptors, but the US policy of prioritizing its own stockpiles has also increased supply pressure.September 19th - Due to the shutdown of Saudi Arabias east-west oil pipeline, European refiners are scrambling for alternative sources, while soaring fuel prices are further pushing up crude oil procurement costs. Following the attack on its pipelines leading to the Red Sea, Saudi Aramco is seeking to increase crude oil shipments through the Strait of Hormuz. This week, Asian buyers purchased tens of millions of barrels of Saudi crude from the vicinity of the strait. However, this adjustment also means that these shipments are further away from European refiners eager for supplies. On Friday, the North Sea crude premium surged to a record high. This comes after Saudi Aramco informed its European customers that it would be unable to supply them with crude oil next month according to long-term agreements. Traders involved in the market said that Norwegian Johan Sverdrup crude, which is similar in quality to Saudi crude, is priced at up to $35 per barrel higher than the Brent spot benchmark. Less than two weeks ago, the premium for the same grade was only 60 cents per barrel. The surge in spot crude prices indicates that European refineries are sparing no expense to secure crude oil supplies and maintain sufficiently high refinery operating rates to alleviate fuel supply shortages. Diesel prices in the region have now risen to over $200 per barrel.German Chancellor Merz: Germany will reduce the tax on gasoline and diesel by approximately 17 euro cents per liter. This measure is scheduled to take effect on October 1st and will remain in effect until the end of 2026.On September 19th, Kansas City Federal Reserve President Jeff Schmid stated that the U.S. economy remains strong and continues to grow. Schmid said he agrees with Federal Reserve Chairman Kevin Warshs explanation for the rise in U.S. Treasury yields, namely that the recent increase is primarily driven by capital demand from artificial intelligence investments and geopolitical challenges, rather than solely by monetary policy factors. Schmid also believes that the U.S. Treasurys Treasury repurchase program will not increase the difficulty for the Federal Reserve in implementing monetary policy.Russian President Vladimir Putin: The Ukrainian authorities did not hold elections in their own country, but tried to prevent Russia from holding elections.

The EUR/GBP exchange rate recovers above 0.8000 in advance of Eurozone inflation and UK gross domestic product

Alina Haynes

Mar 30, 2023 16:05

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The EUR/GBP pair extended its recovery above 0.88 during the Asian trading session. Anticipating that the European Central Bank (ECB) will continue to raise interest rates to combat persistent inflation, the cross has depreciated progressively. Friday will see the publication of preliminary Eurozone Harmonized Index of Consumer Prices (HICP) and Gross Domestic Product (GDP) (Q4) figures. Prior to the publication of these figures, it is anticipated that the asset will exhibit explosive activity.

 

It is anticipated that the preliminary Eurozone HICP will decelerate significantly from 8.5% to 7.3%. While it is anticipated that the core HICP will rise to 5.7% from 5.6% in the previous release. Weak energy prices are anticipated to have a significant impact on Eurozone inflation. In light of Christine Lagarde's prediction that inflation will remain elevated for an extended period of time, the European Central Bank (ECB) is expected to continue tightening monetary policy.

 

In the interim, banking tensions are subsiding as the absence of information regarding additional collateral damage has a positive impact on the market. Chief Economist Philip Lane stated on Wednesday that ECB interest rates must rise if banking tension has no or a "relatively limited" impact.

 

Investors avidly anticipate the United Kingdom's Gross Domestic Product (GDP) data. According to the consensus, the United Kingdom's growth in the fourth quarter of CY2022 remained unchanged. It is anticipated that the annual GDP will remain unchanged at 0.4%. It is expected that the British economy will undergo a severe recession as a result of high inflation and sluggish growth.

 

The Bank of England (BoE) policymakers appear confident that inflation will moderate in the near future and that the unexpected rise in February's inflation was a one-time anomaly; however, the absence of evidence raises doubts. If inflation persists, BoE Governor Andrew Bailey stated that additional rate increases would be announced. In contrast, Bank of America (BoA) analysts anticipate that the Bank of England (BoE) will not increase rates and will maintain current levels until 2024.


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