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February 20th - US core PCE inflation rose more than expected in December, and various signs indicate that inflation will accelerate further in January, reinforcing market expectations that the Federal Reserve will not cut interest rates before June. Data released Friday by the US Bureau of Economic Analysis showed that, excluding volatile food and energy prices, the core PCE index rose 0.4% month-over-month in December, compared to economists forecasts of a 0.3% increase. The core PCE inflation rate rose 3.0% year-over-year, compared to 2.8% in November. Core PCE is one of the Federal Reserves most favored indicators. This data is included in the fourth-quarter GDP forecast report released Friday. Although the US Bureau of Labor Statistics Consumer Price Index report released last week showed a moderate increase in Januarys CPI, inflation in the service sector still exhibits some lag. Economists also noted a surge in legal services prices in January.February 20th - U.S. economic growth lagged behind expectations at the end of last year, dragged down by a record government shutdown, weak consumer spending, and trade. According to preliminary estimates released by the U.S. government on Friday, the annualized growth rate of gross domestic product (GDP) in the fourth quarter, adjusted for inflation, was 1.4%, down from 4.4% in the previous quarter. Data from the Bureau of Economic Analysis showed that the overall economy grew by 2.2% last year. The weak economic performance fell short of all expectations in a Bloomberg survey of economists, as the U.S. government was shut down for nearly half of the three-month period during the quarter. The Bureau of Economic Analysis stated that the government shutdown reduced GDP by about one percentage point. Despite the slowdown at the end of the year, these figures still marked a solid year for the U.S. economy. The U.S. economy contracted in the first quarter due to a surge in imports before tariffs took effect, but subsequently achieved one of its strongest growth rates in years. This turnaround was thanks to Trumps abandonment of the toughest tariffs and the Federal Reserves interest rate cuts, which propelled the stock market to record highs and enabled wealthy Americans to continue spending.February 20th - The U.S. economy slowed in the fourth quarter of last year, impacted by the record government shutdown and slowing consumer spending. Data released Friday by the Commerce Department showed that, after seasonal and inflation adjustments, the annualized growth rate of U.S. gross domestic product (GDP) in the fourth quarter was 1.4%. Economists surveyed by The Wall Street Journal had expected a figure of 2.5%. The fourth-quarter growth rate was a significant slowdown from the astonishing 4.4% growth rate seen in the summer. Federal government spending fell by 16.6% in the fourth quarter.German Finance Minister Klingbeer on ECB President Lagardes term: This is just speculation, and I will not participate in speculation.Following the release of the latest economic data, U.S. short-term interest rate futures showed little change; traders continue to bet that the Federal Reserve will cut rates in June.

Despite growing chances of BOE-BOJ policy divergence, the GBP/JPY exchange rate is falling toward 162.00

Daniel Rogers

Sep 22, 2022 15:05

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The pound to yen exchange rate has given up the key support level of 162.20 during the Asian session and is now slowly descending toward the 162.00 level. Since breaking down below the consolidation range formed between 162.80-164.47, the asset has been trending downwards. The cross has been trending downwards despite growing expectations of further growth in policy divergence between the Bank of England (BOE) and the Bank of Japan (BOJ).

 

British households are facing headwinds due to price pressures inside the British economy. The latter is obligatory in order to provide dividends that are adjusted for inflation and yield a net gain of one cent per year. The current state of the labor market, GDP forecasts, and energy costs all argue against a rate hike by the BOE. Although unpleasant, the Governor of the Bank of England (BOE) must bite the bullet and announce a rate increase of 50 basis points (bps).

 

Some of Liz Truss's economic measures, such as her announcement of a reduction in tax brackets, an energy and electricity cost ceiling, and a trade pact with the United States, look to be beneficial to the economy. The pound bulls aren't getting stronger despite this.

 

As a result of the BOJ's reluctance to intervene in the currency market, the Japanese yen has risen on the Tokyo financial scene. It has been reported by Bloomberg news wires that Japan's former vice foreign minister, Tatsuo Yamasaki, has said that the Japanese government is prepared to intervene in the currency markets at any time. The yen doesn't need America's blessing, he said, so the government won't be changing it.

 

Given the continued need to monitor the economy's growth prospects and inflation drivers, it is expected that the BOJ would maintain a "neutral" stance on monetary policy. The policy gap between the BOE and BOJ will widen as a result.

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