- Harry Bennett
- November 15, 2022
- 7:48 am
- 10 min read
U.S. Inflation starts to cool down but how will the Fed respond?
Indices
Futures
Forex
– The Dollar had its worst day since March 2009 last week, the dollar index has since fallen below 107.00, a level not seen since mid-August, as U.S. data is better than expected. This has potentially set the stage for a slower pace of interest rate hikes by the Federal Reserve.
– A Bureau of Labor Statistics report showed that the annual inflation rate eased to 7.7%, below economists’ forecasts of 8%. The report also showed the CPI coming in cooler than expected on a month-on-month basis and in its core reading.
– A rise in cancellations from Asia to the U.S. is slowing the U.S. export market and global shippers are warnings of more “radical” cuts in vessels. The Port of Savannah and Port of Long Beach are seeing the sharpest increase in shipping container delays.
– Covid infections are surging in the capital of China’s export-heavy Guangdong province, raising concerns of another slowdown on the economy. Could this spark another bout of strict lockdowns? Schools in the main districts of Guangzhou closed and more people are ordered to work from home.
– Bank of Japan’s (BOJ’s) Governor Haruhiko Kuroda plans to stick to monetary easing to support the economy in the short term. Focus is on stable inflation and wage growth. It’s dovish policy faced some criticism as the Japanese Yen saw significant downward pressure.
– Covid infections are surging in the capital of China’s export-heavy Guangdong province, raising concerns of another slowdown on the economy. Could this spark another bout of strict lockdowns? Schools in the main districts of Guangzhou closed and more people are ordered to work from home.
– The European Union’s executive commission slashed its forecast for economic growth next year, saying the 19 countries that use the euro currency will slide into recession over the winter as peak inflation remains. This will last longer than expected and high fuel and heating costs will erode consumers purchasing power.
– European yields continued to follow U.S. lower with the German 10 year yield trading below 2% last week and Italian yields moving close to 4%.
– Sterling (GBP) extended gains against the USD, to trade above the $1.18 mark for the first time late August. Data on Friday showed the UK economy contracted 0.2% in the third quarter, less than markets had expected, suggesting the Bank of England will maintain its policy tightening path as the UK inflation rate is running at a 40-year high.
– Imports of goods and services to the United Kingdom dropped 3.8% to GBP 72.3 billion in September 2022, down from August’s all-time high of GBP 75.1 billion. Goods purchases were down by 5.0%, with imports from the EU falling 7.3% due to lower purchases of chemicals and fuel.
Conclusion
The global macroeconomic outlook does not look promising as global recessionary fears continue to mount. Inflationary data in the U.S cools but questions around China remain. Consumer purchasing power is falling across the globe which is why an economic slowdown is so evident. The winter in the UK and EU loom and this is made worse with the extremely fragile Russian – Ukraine war. Food markets look fragile as weather variation impacts markets.
Written by:
Harry Bennett
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