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On January 29th, a research report from CITIC Securities stated that the Federal Reserves decision to maintain its policy rate unchanged at its January 2026 meeting was in line with market expectations. Both the meeting statement and Powells remarks indicated signs of stabilization in the US unemployment rate, and Powell stated that the policy rate was in a good position. Powell predicted that tariff inflation would peak later than the first quarter, around mid-year, and that it remained uncertain whether Trump would introduce new substantive tariff policies. Therefore, CITIC Securities expects no further rate cuts during Powells remaining two meetings as Fed Chairman. Regarding asset prices, US stocks, bonds, and the dollar saw relatively small fluctuations, while gold prices were largely driven by geopolitical factors and market sentiment.On January 29th, a research report from CICC stated that the Federal Reserves decision to keep interest rates unchanged at its January meeting was in line with market expectations. Governor Wallers dissenting vote may be related to his desire to be nominated as the next Fed Chair. The monetary policy statement indicated that "the unemployment rate has stabilized," and Powell stated that monetary policy is "in the right place," suggesting a higher threshold for another rate cut in the near term. Beyond this, Powell did not provide much guidance and avoided other questions unrelated to interest rate setting. We believe the Fed is still likely to cut rates twice in 2026, but the first cut may be delayed until the second quarter. The core problem of the US economy is not insufficient growth, but rather income inequality and affordability pressures on ordinary families. These structural problems cannot be solved by monetary policy alone; instead, they may prompt the government to adopt more non-market interventionist policies to address voters concerns.January 29th - According to foreign media reports, two US officials revealed on Wednesday that the US is transferring an oil tanker seized this month to Venezuela, marking the first time the Trump administration has returned such a tanker. The US has been continuously seizing oil tankers linked to Venezuela for months, carrying out seven seizures since the end of last year. The officials stated that the tanker being transferred to Venezuelan authorities is the Panamanian-flagged supertanker "Sofia." They did not specify the reason for the return. The "Sofia" was intercepted by the Coast Guard and US military on January 7th. At the time, the US government described the tanker as a "stateless, sanctioned" shadow fleet tanker.Goldman Sachs downgraded Indonesian stocks to underweight.On January 29th, Tesla CEO Elon Musk stated during an earnings call on January 28th that the company will cease production of the Model S and Model X vehicles next quarter. "Its time to honor the Model S and Model X projects as we truly move towards a future centered on self-driving technology," Musk said. Musk also revealed that Tesla is replacing the Model S and Model X production lines at its Fremont, California factory with Optimus production lines, with a long-term goal of achieving an annual production capacity of one million robots.

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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