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On April 3, Kimberly Clausing, a former Biden administration official and nonresident senior fellow at the Peterson Institute for International Economics, called Trumps tariff announcement on Wednesday "very stubborn and much worse than I expected." "I expected things to be bad, but I didnt expect this level of self-harm. Its shocking that anyone thought this was a good idea. Id be shocked if we can get through this without a recession and Trump doesnt have to reverse his policies."On April 3, some economists worry that if Trump does not quickly cancel the latest round of tariffs, it may push the US economy into a recession. "If the US government implements these higher tariffs without major exemptions, it will be difficult for the economy to digest this. A recession seems more likely." said Mark Zandi, chief economist at Moodys Analytics. Zandi said, "In many ways, the tariffs announced by Trump are even worse than the worst case scenario he envisioned. If they stick to it, I will buckle up and prepare for the impact." Zandi added that on a static basis, tariffs account for nearly 2% of GDP (not considering the impact of tariffs on the economy and taxes), which makes this round of tariffs the largest tax increase since the tax increase used to finance the war during World War II.German Automobile Industry Association VDA: The EU must now speed up and make up its mind on the issue of free trade agreement.On April 3, the Reserve Bank of Australias latest report for the banking industry warned that continued uncertainty in US trade policy "could have a chilling effect on business investment and household spending decisions, and pose a significant headwind to the outlook for global economic activity and inflation." The Reserve Bank of Australia said there was also considerable uncertainty about the impact of possible changes in fiscal, regulatory and other government policies on global growth and inflation.The Hang Seng Index in Hong Kong opened on April 3 (Thursday) down 564.32 points, or 2.43%, to 22,638.21 points; the Hang Seng Technology Index opened on April 3 (Thursday) down 168.53 points, or 3.11%, to 5,257.91 points; the CSI 300 Index opened on April 3 (Thursday) down 219.05 points, or 2.57%, to 8,312.46 points; the H-share Index opened on April 3 (Thursday) down 61.24 points, or 1.59%, to 3,800.76 points.

USD / JPY Strikes Above 136.20 As Fed Rate Increase Worries Return

Daniel Rogers

Mar 02, 2023 16:07

 

 

The USD / JPY pair is battling in the Asian session to maintain its auction above 136.40, while the downside looks to be supported around 136.00. The asset is expected to continue rising and surpass the 136.40 resistance mark as investors foresee the Federal Reserve (Fed) raising interest rates to strengthen its defense against persistent inflation.

 

Following a down day on Wednesday, S&P500 futures recorded modest gains during the Asian session, signaling a minor improvement in investors' risk appetite. Despite this, the market as a whole is very risk adverse. The spread of the US Dollar Index (DXY) is expected to narrow after a period of chaotic swings.

 

It indicates that the Federal Reserve's (Fed) officials' hawkish stance has revived US Treasury prices.

 

Raphael Bostic, President of the Atlanta Fed, predicted that the central bank would increase the terminal rate to a level of 5.00% to 5.25% in view of the Consumer Price Index's (CPI) enduring nature. The Fed policymaker also thinks the central bank will continue to have a high final rate after 2023. Additionally, Fed Chief Jerome Powell has reaffirmed that an early rate cut could have disastrous consequences for the inflation scenario.

 

It is clear that a future rise in the price index is expected after Wednesday's release of the US ISM Manufacturing PMI. The New Orders Index and Manufacturers' Prices Paid were able to show that the inflation scenario is getting more complicated despite the February PMI figures' failure to wow the market. Figures increased to 47.0 from 43.7 anticipated and 42.5 earlier published, indicating a strong order book. The Manufacturing Price Paid increased to 51.3 from 45.0, as opposed to the average forecast of 45.0, and from 44.5 in the previous report, suggesting that the Producer Price Index (PPI) may soon show a surprise increase.

 

On the Tokyo front, the Japanese Yen is being impacted by a string of dovish remarks from Bank of Japan (BoJ) officials. Following dovish remarks from BoJ Governor-nominee Kazuo Ueda and BoJ Deputy Governor Ryozo Himino, board member Junko Nakagawa also considered the present monetary policy appropriate. "An expansionary strategy is absolutely essential for maintaining the economy and increasing earnings," he said.


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