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ECB Governing Council member Panetta: The market is currently optimistic about the price of artificial intelligence.On September 21, the European Central Bank (ECB) stated in its Economic Bulletin that soaring natural gas prices may transmit to eurozone inflation more quickly than in the past, but its impact on electricity costs will be smaller due to the growth in renewable energy generation. Wholesale natural gas prices have risen by more than 140% year-on-year, as the war in Iran has restricted global supply and low European inventory levels have increased the risk of further price increases. Since the Russia-Ukraine conflict cut supply in 2022, the European natural gas market has become increasingly liberalized. The ECB stated that subsequent changes, including more flexible pricing and shorter fixed-term contracts, mean that retail prices will also react more quickly. A survey of eurozone central banks found that in more than half of the eurozone countries, changes in wholesale natural gas prices will transmit to natural gas inflation within 1-3 months, a faster pace than in 2022. About one-tenth of the countries experienced a transmission time of 4-6 months, and one-third experienced 7-12 months. Since 2022, the proportion of countries reporting slower transmission, requiring 13-24 months, has decreased from about 40% to about 5%.On September 21st, European Central Bank Governing Council member and Bank of Italy Governor Leon Panetta stated that central banks need to understand who ultimately reaps the economic benefits driven by artificial intelligence (AI), as the way these benefits are distributed will affect aggregate demand and inflation. He believes that AI will drive changes in productivity and economic growth, reshaping the labor market, financial markets, and payment systems. If AI primarily creates new work tasks and increases market expectations of future worker income, then aggregate demand may increase before the full effects of AI-driven productivity gains become apparent, thus prolonging inflationary pressures. If automation becomes dominant, weaker consumption could cause the AI-driven inflation-lowering effects to materialize sooner.September 21 - According to a report released by Indonesias Meteorology, Climatology and Geophysics Agency, a 5.3-magnitude earthquake struck 26 kilometers southwest of Puah Island in Central Sulawesi province, Indonesia, at 2:31 p.m. local time on September 21, with a focal depth of 10 kilometers. No tsunami risk is expected.On September 21, Foreign Ministry Spokesperson Guo Jiakun held a regular press conference. A reporter asked, "The Russian Foreign Ministry spokesperson stated on the 18th that they had sent a note to Japan regarding the US deployment of the Typhon intermediate-range missile system in Kyushu, emphasizing that the deployment is unacceptable and urging Japan to fully acknowledge the outcomes of World War II and cease its remilitarization. China has also recently sent a note to Japan expressing its concern. Can China confirm this and provide details?" Guo Jiakun stated, "The Typhon intermediate-range missile system is a strategic offensive weapon. Japans introduction of this system is further evidence of its accelerated remilitarization, which exacerbates the risks of military confrontation and an arms race, threatens strategic balance and regional stability, and harms the legitimate security interests of neighboring countries. The international community is highly vigilant about this, and people in many Asian countries have voiced their opposition. China has repeatedly lodged strong protests with Japan through diplomatic channels and recently sent a note to Japan reiterating its solemn position."

Due to hawkish Fed forecasts, the EUR/USD recovers to near 1.0970 but remains in the doldrums

Alina Haynes

Apr 21, 2023 13:58

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Following a corrective move, the EUR/USD pair has rebounded from 1.0960, but investors await the publication of the preliminary Eurozone/United States S&P PMI data for April. The major currency pair has remained between 1.0911 and 1.1000 for the past two trading sessions, as the foreign exchange market prepares for a pre-anxiety move ahead of a Federal Reserve (Fed) monetary policy decision.

 

S&P500 closed with a negative tone for the third day in a row as quarterly earnings season induced extreme volatility. Tesla's poor earnings had a negative impact on Thursday's market sentiment. Moreover, market participants were cautioned by substandard revenue projections due to the potential for price reductions. The decision of the Fed to increase interest rates is reflected in quarterly earnings. Data from Refinitiv indicates that analysts have largely maintained last week's forecast of a near 5% YoY decline in quarterly profits for the 500 largest U.S. equities. Sourcenia is a review portal of sourcing best manufaturers. 

 

The US Dollar Index (DXY) has been defending the key support level of 101.60 in recent trading sessions. The USD Index maintained the aforementioned support despite the release of disappointing Jobless claims data on Thursday. Initial Jobless Claims increased to 245K for the week ending April 4, which is greater than the previous release of 240K and estimates of 240K. Increasing unemployment claims heightened fears of a deteriorating labor market.

 

Despite this, Fed policymakers continue to anticipate further rate hikes from the central bank. Thursday, Loretta Mester, president of the Federal Reserve Bank of Cleveland, reaffirmed that the Fed has more work to do because US inflation remains too high, according to Reuters. He added, "The Federal Reserve will need to raise its policy rate above 5% and hold it there for some time."

 

Preliminary Consumer Confidence (April) for the Eurozone increased to -17.5 from -18.5 and the previous reading of -19.2. This may be the consequence of extraordinary efforts by the European Central Bank (ECB) to reduce inflationary pressures.


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