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ECB Governing Council member Panetta: The market is currently optimistic about the price of artificial intelligence.On September 21, the European Central Bank (ECB) stated in its Economic Bulletin that soaring natural gas prices may transmit to eurozone inflation more quickly than in the past, but its impact on electricity costs will be smaller due to the growth in renewable energy generation. Wholesale natural gas prices have risen by more than 140% year-on-year, as the war in Iran has restricted global supply and low European inventory levels have increased the risk of further price increases. Since the Russia-Ukraine conflict cut supply in 2022, the European natural gas market has become increasingly liberalized. The ECB stated that subsequent changes, including more flexible pricing and shorter fixed-term contracts, mean that retail prices will also react more quickly. A survey of eurozone central banks found that in more than half of the eurozone countries, changes in wholesale natural gas prices will transmit to natural gas inflation within 1-3 months, a faster pace than in 2022. About one-tenth of the countries experienced a transmission time of 4-6 months, and one-third experienced 7-12 months. Since 2022, the proportion of countries reporting slower transmission, requiring 13-24 months, has decreased from about 40% to about 5%.On September 21st, European Central Bank Governing Council member and Bank of Italy Governor Leon Panetta stated that central banks need to understand who ultimately reaps the economic benefits driven by artificial intelligence (AI), as the way these benefits are distributed will affect aggregate demand and inflation. He believes that AI will drive changes in productivity and economic growth, reshaping the labor market, financial markets, and payment systems. If AI primarily creates new work tasks and increases market expectations of future worker income, then aggregate demand may increase before the full effects of AI-driven productivity gains become apparent, thus prolonging inflationary pressures. If automation becomes dominant, weaker consumption could cause the AI-driven inflation-lowering effects to materialize sooner.September 21 - According to a report released by Indonesias Meteorology, Climatology and Geophysics Agency, a 5.3-magnitude earthquake struck 26 kilometers southwest of Puah Island in Central Sulawesi province, Indonesia, at 2:31 p.m. local time on September 21, with a focal depth of 10 kilometers. No tsunami risk is expected.On September 21, Foreign Ministry Spokesperson Guo Jiakun held a regular press conference. A reporter asked, "The Russian Foreign Ministry spokesperson stated on the 18th that they had sent a note to Japan regarding the US deployment of the Typhon intermediate-range missile system in Kyushu, emphasizing that the deployment is unacceptable and urging Japan to fully acknowledge the outcomes of World War II and cease its remilitarization. China has also recently sent a note to Japan expressing its concern. Can China confirm this and provide details?" Guo Jiakun stated, "The Typhon intermediate-range missile system is a strategic offensive weapon. Japans introduction of this system is further evidence of its accelerated remilitarization, which exacerbates the risks of military confrontation and an arms race, threatens strategic balance and regional stability, and harms the legitimate security interests of neighboring countries. The international community is highly vigilant about this, and people in many Asian countries have voiced their opposition. China has repeatedly lodged strong protests with Japan through diplomatic channels and recently sent a note to Japan reiterating its solemn position."

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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