USD$ proves to be resilient amid trade deficits; ECB raises rates causing Euro value to nose-dive; South African core inflation rises from fuel and food inflation woes; Newly appointed UK PM Sunak postpones crucial budget announcement to Nov 17th; Japan's ultra-low interest rate finally proving to be unsustainable, new stimulus injection to help boost ¥'s domestic spending; Aussie government tightens spending controls in fear of potential economic contraction in 2023.
USD: DOLLAR CONTINUES TO PROVE RESILIENT
Composite PMI Output Index falling to 47.3 in October from 49.5 in September, conveying a decrease in US business activity for a fourth consecutive month to October. The US housing sector data is starting to reflect the effect of high inflation and interest rates, with an average contract rate on a 30-year fixed-rate mortgage having risen by 22bps, the highest since 2001.
The US economy proves resilient by still growing with a handsome 2.6% in Q32022, albeit there is a national trade deficit and a dormant domestic demand. The Fed is expected to raise rates for an umpteenth time by 75bps, in its next policy meeting in early November.
EUR: ECB RAISES RATES BY 75BPS
The European Central Bank took a rate hike of 75bps, the highest since 2009, in hopes to recover cash from years of vigorous stimulus. The EUR€ fell resultant of such a hike, tanking more than 1%, just below the purchasing parity power of the USD$.
S&P Global's euro zone flash composite Purchasing Managers' Index (PMI) fell to 47.1 from 48.1 in September, indicating a seemingly non-threatening contraction of business activity within the Euro zone. Germany's spearheaded to a 0.6% GDP contraction in Q42022 as per economic analysis of the Munich-based Ifo Institute.
ZAR: CORE INFLATION & MID-TERM BUDGET PITCH
When the Saffa Monetary Policy Committee (MPC) began its hiking cycle in November 2021, it pointed out a need to smooth out temporary price shocks from high fuel and food inflation. Such inflation of basic consumer goods has fed into the increased price of core goods such as vehicles and household contents.
Core inflation is expected to average 4.4% in 2022, 0.5bps higher than projected in Sept 2021. Electricity supply shortages and further supply chain disruptions keep the Saffa economy at bay from performing really well.
GBP: UK BUDGET ANNOUNCEMENT POSTPONED
The UK's first British-Indian PM Rishi Sunak boldly announced a delay in budget announcement to the date of Nov 17th, where he'll prescribe the economic remedies to recover the economy's public finances.
Low GDP growth and record high borrowing have ravaged the country's reserves, with as much as a £40 billion budget shortfall in current existence. Newly appointed Chancellor of the Exchequer Jeremy Hunt will divulge a comprehensive debt repayment plan for winning in the medium term, likewise on Nov 17th.
JPY: ULTRA-LOW INTEREST RATES PROVING TO FAIL
The Bank of Japan (BOJ)'s ultra-low interest rate strategy is proving itself to be indefensible. The tightening monetary policy that the BOJ's central banking peers such as the Bank of England, US Fed, and ECB, seems to be the new Zen focus.
The BOJ seeks to increase the purchase of bonds in November, to boost the levels of cash circulation in Japan, as their ultra-low interest rate approach led to too much cash leaving Japan, and not enough of it being retained to enjoy a multiplier effect.
Furthermore, the BOJ released a new stimulus package last Friday, with a ¥39.0 trillion ($USD265 billion) injection into the local economy, which aims to revive GDP by around 4.6%.
AUS: LABOUR GOVERNMENT ANNOUNCES BUDGET
With a forecasted deficit looming, the Reserve Bank of Australia (RBA) stipulate in its Budget announcement that spending controls would be implemented to reduce country cash outflows.
Rising inflation will keep the Australian economy growing slower than desired in Q1 of 2023, as the budget purported a decreased 2023-2024 fiscal GDP growth of 1.5% from that of 2.5% forecasted in April this year. GDP is also speculated by pundits to be downgraded for the current 2022-2023 fiscal year to 3.25% from 3.5%.
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