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December 19th - According to three sources, European Central Bank (ECB) policymakers expect to keep interest rates unchanged next year, but are not yet ready to completely rule out further rate cuts due to the still highly uncertain economic outlook. The ECB kept interest rates unchanged on Thursday and raised some of its economic growth and inflation forecasts, a move widely interpreted by investors as closing the door to further rate cuts. However, sources indicated that policymakers at the meeting had no intention of announcing the end of the easing cycle because uncertainty remains high. Nevertheless, all three sources stated that the most likely outcome is that interest rates will remain unchanged throughout 2026, consistent with market expectations. The sources said that most policymakers believe the risks to the economic growth outlook are broadly balanced, although a minority believe that actual growth may be lower than the ECBs own forecasts. There is even less disagreement on inflation, with most officials believing that inflation risks are also balanced.Goldman Sachs predicts that the U.S. power systems reserve capacity will further decline due to rapid growth in electricity demand and the pace of coal-fired power plant retirements outpacing the construction of new renewable energy and natural gas power generation capacity.Goldman Sachs: Given that the TTF forward curve has not yet fully reflected the current bearish LNG cycle, we continue to recommend its “Global Gas Surplus Trading” strategy (shorting TTF natural gas futures in Q3 2027).Goldman Sachs projects TTF natural gas prices to be €29/20 per megawatt-hour (US$10/6.85 per million British thermal units) in 2026/27. It also projects US natural gas prices to reach US$4.60/million British thermal units (MMBtu) and US$3.80/MMBtu in 2026 and 2027 respectively, sufficient to incentivize US natural gas production growth.Goldman Sachs: Oil prices are expected to rebound in the fourth quarter of 2026 as the market begins to price in renewed supply shortages in the second half of 2027 and shifts its focus to incentivizing long-cycle capacity to come online.

A decrease in the EUR/JPY exchange rate is about to occur as recession fears grow. It is now over 138.00

Alina Haynes

Jul 07, 2022 14:43

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The EUR/JPY currency pair is doing poorly during the Tokyo session. The cross is bouncing around a narrow range of 138.26-138.60 after recovering from its low of 137.27 on Wednesday. Generally speaking, bears are in charge of the asset. The pair has fallen during the last week as a result of failing to overcome the 144.00 resistance level, which has been a barrier for four weeks.

 

The chance of a recession in the eurozone has significantly increased as a result of the Bank of England's (BOE) negative assessment of the global economy. The BOE believes that price volatility in raw materials and energy might lead to economic disruptions in the future. The negative outlook of a Western central bank is fundamentally harmful to the FX market. The shocks to the economy would undoubtedly harm the eurozone as well because it forbids the import of Russian oil.

 

Along with fears of a recession, the common currency's bulls are also plagued by disputes over gas supplies between the economies of Europe and the United Kingdom. The British government has said that it would stop exporting gas to Europe if shortages develop there in the upcoming months.

 

The underperformance of the wage-price notion in Tokyo worries the Bank of Japan (BOJ). In order to keep inflation rates close to target levels, according to the BOJ, pay increases are required. If not, families would face greater price pressures, which would result in a decrease in the overall volume of demand.


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