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On October 3rd, Bank of America economists stated in a report that the UKs approximately £20 billion fiscal gap could be addressed through small tax increases, such as a gambling tax and a freeze on the income tax threshold. However, if the fiscal gap exceeds £20 billion, it may be difficult to fill without raising other taxes such as income tax, national insurance contributions, and VAT, or through cuts in public spending. The economists stated, "We note that raising VAT would be inconsistent with the Chancellors goal of reducing inflation, while a wealth tax appears increasingly unlikely."The French-German 10-year yield spread erased its previous narrowing trend and is now 82 basis points.French Socialist Party leader Faure: Le Cornus budget proposal has shortcomings.French Socialist Party leader Faure: The tax plan proposed by Le Cornu is far from our previous suggestions.On October 3rd, New York Fed President John Williams, a permanent FOMC member, stated on Friday that unpredictable changes are inevitable, and central banks need to recognize this and develop strategies to address these circumstances. He stated that coping with uncertainty requires strong principles and strategies to address a range of unexpected events, while noting that new situations will continue to emerge. Williams also stated that previously unconventional strategies, such as bond purchases, are no longer novel but rather a normal part of the toolkit. Furthermore, Williams stated that stabilizing inflation expectations is crucial and cannot be taken for granted.

AUD/NZD Extends Range Above 1.0950 As New Zealand Trade Balance Data Is Positive

Alina Haynes

Jan 30, 2023 15:29

AUD:NZD.png 

 

After opening with a gap down to 1.0926, the AUD/NZD pair displayed a robust recovery in the early Asian session. The cross is gaining ground despite the publication of upbeat New Zealand Trade Balance numbers.

 

December exports grew to $6.72 billion from $6.34 billion, while imports declined to $7.19 billion from $8.52 billion. The annual Trade Balance came in at -14.46 billion New Zealand dollars, as opposed to the previously stated -14.98 billion.

 

The New Zealand Employment Statistics, which will be issued on Wednesday, will provide investors with direction. It is projected that the Employment Change (Q4) will decrease to 0.7% from 1.3% in the previous publication. The unemployment rate is anticipated to hold steady at 3.3%. As a result of the Reserve Bank of New Zealand's decision to raise interest rates, the New Zealand economy is unable to create significant employment opportunities (RBNZ).

 

The labor cost index statistics will otherwise dominate the conversation. The employment bills index (annual) is anticipated to rise to 4.45 from 3.8% previously. And the expected quarterly figure is 1.3%, up from 1.1% in the previous report. Since households would have more liquid assets, a rise in labor expenses might keep inflationary pressures on the rise.

 

Notably, the New Zealand economy has shown no indications of inflation abating, as the annual Consumer Price Index (CPI) (Q4) grew to 7.2% from the consensus forecast of 7.1%, and an increase in retail demand will intensify inflationary pressures.

 

On the Australian front, investors are keeping a tight eye on Tuesday's retail sales report, which is expected to reveal a 0.3% fall from the previous release of 1.4%. This could reduce difficulties for the Reserve Bank of Australia (RBA), which is battling to contain the persistent inflation in the Australian economy.


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