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Downing Street: British Prime Minister Starmer and Canadian Prime Minister Carney discussed the situation in the Middle East, including the impact of the continued closure of the Strait of Hormuz on international shipping.Downing Street: Leaders discussed the current situation in the Middle East and the importance of reopening the Strait of Hormuz to end the disruption to global shipping.Israel Defense Forces: The Israel Defense Forces continue to weaken the Iranian regime’s ballistic missile sites and defense systems in the west and central regions.The Israel Defense Forces (IDF) stated that it struck more than 200 targets in western and central Iran over the past day. Targets included command centers where regime personnel were active, defense systems, and weapons storage and production sites.March 16th - The Reserve Bank of Australia (RBA) will hold its second interest rate meeting of the year this week. The countrys already existing inflation problem has been further exacerbated by soaring energy prices triggered by the Middle East conflict. Economists expect the RBA to raise interest rates on Tuesday, increasing the cash rate to 4.1%, in response to the potential for rising oil prices to push up inflation. The money market sees a 75% probability of a March rate hike and anticipates further tightening. Bank of America economist Nick Steiner stated, "The Iranian conflict poses a significant upside risk to inflation, and we expect overall inflation to approach 5%." Australias inflation target is 2-3%. Steiner pointed out that given the current price pressures and tight labor market, the central bank has "virtually no room for maneuver." A failure to raise rates in March "could lead to more drastic tightening later, as high inflation would persist longer and affect public expectations."

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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