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July 9th - A report from Bank of Japan (BOJ) branch governors at Thursdays meeting showed that the Japanese economy remains robust overall despite headwinds including Middle East tensions, rising oil prices, and a weak yen. The BOJ stated that logistical disruptions and raw material shortages caused by geopolitical risks have put pressure on exports and production. The bank added that the risk of a sharp economic downturn has diminished due to the implementation of alternative procurement programs and adjustments to transportation routes. This could strengthen market expectations for further interest rate hikes in the near term. Overnight index swap market pricing currently indicates that the market expects at least one more BOJ rate hike before the end of this year.Yields on UK government bonds of all maturities fell by about 4-6 basis points in early trading.On Thursday, July 9th, the German DAX 30 index opened 247.33 points higher, or 0.99%, at 25113.00; the UK FTSE 100 index opened 30.04 points lower, or 0.29%, at 10459.00; the French CAC 40 index opened 59.35 points higher, or 0.72%, at 8312.01; the Euro Stoxx 50 index opened 56.94 points higher, or 0.92%, at 6261.85; the Spanish IBEX 35 index opened 211.39 points higher, or 1.11%, at 19260.69; and the Italian FTSE MIB index opened 418.25 points higher, or 0.81%, at 52235.50.Gold prices rebounded above $4,100 an ounce on July 9th after Wednesdays sell-off. This rally was supported by a weaker dollar and renewed geopolitical tensions in the Middle East following Wednesdays renewed clashes between the US and Iran. However, rising energy prices could complicate the inflation outlook, reinforcing market expectations that the Federal Reserve will maintain high interest rates for a longer period or raise rates further. The minutes of the Feds mid-June policy meeting highlighted a hawkish shift within the committee, putting pressure on precious metals. Thomas Ryan, an economist at Capital Economics, said, "The minutes reiterated that the door to a September rate hike remains very open."According to Futures News on July 9th, as of 15:00 Beijing time, spot platinum rose 1.86% and spot palladium rose 1.78%.

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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