Forex Fundamental News Facts for 18th April, 2024

Forex Fundamental News Facts for 18th April, 2024

[Quick Facts]

1. Fed Beige Book shows prices rise moderately.
   2. Mester says the Fed will cut rates at some point, but not in a hurry.
   3. With a massive drill in the north, the IDF prepares for possible war.
   4. Centeno says ECB won’t be guided by the U.S. economy in setting rates.
   5. Nagel says ECB June rate cut looks increasingly likely.
   6. Oil prices fall as inventories rise and geopolitical concerns ease.
   7. ECB’s Holzmann is not yet fully convinced that rates will be cut in June.
   8. Australian Employment Drops, Sending Jobless Rate Up To 3.8%.
   9. G7 Finance Leaders Pledge Cooperation on Iran Sanctions, Frozen Russian Assets.
   10. Yellen Meets Japan, South Korea Counterparts in Bid to Boost Economic Ties.

Fed Beige Book shows prices rise moderately:
The Federal Reserve’s latest Beige Book, published on April 17, indicates a slight expansion in overall economic activity. However, consumer spending and manufacturing activity have seen little to no growth. Employment levels have increased moderately across most districts, but there is a shortage of qualified applicants for certain jobs. Prices have increased modestly, and firms are finding it difficult to pass on cost increases to consumers, leading to smaller profit margins. The economic outlook is cautiously optimistic, with inflation expected to remain slow.

Mester says the Fed will cut rates at some point, but not in a hurry:
Loretta Mester, President of the Cleveland Federal Reserve Bank, stated that the Fed could reduce borrowing costs as price pressures are expected to ease this year. However, the Fed wants to ensure that inflation will continue to move toward its 2% target before cutting rates.

With a massive drill in the north, IDF prepares for possible war:
The Israel Defense Forces’ (IDF) 91st “Galilee” Regional Division has completed a large-scale drill in northern Israel. The drill simulated attack and defensive scenarios and is part of the IDF’s efforts to prepare for potential conflicts in the northern region.

Centeno says ECB won’t be guided by U.S. economy in setting rates:
European Central Bank (ECB) Governing Council member Centeno stated that the ECB will set monetary policy based on conditions within the euro area, not the United States. He also mentioned that officials shouldn’t worry too much about services inflation, which is falling more slowly than other inflation.

Nagel says ECB June rate cut looks increasingly likely:
Joachim Nagel, an ECB Governing Council member, said that the ECB is likely to cut interest rates at its next meeting. However, there are still risks as it is unclear whether inflation will return to the 2% target next year.

Oil prices fall as inventories rise and geopolitical concerns ease:
Crude oil futures were lower as the weekly inventory report from the US Energy Information Administration (EIA) is expected to show an increase in U.S. crude oil inventories. The American Petroleum Institute (API) reported that crude inventories increased by nearly 4.1 million barrels last week. Geopolitical concerns over Iran’s attack on Israel have eased, pushing oil prices down.

ECB’s Holzmann is not yet fully convinced that rates will be cut in June:
Robert Holzmann, an ECB Governing Council member, said he is not yet fully convinced that interest rates will be cut in June. He mentioned that the outcome of wage negotiations in the euro area and the escalation of tensions in the Middle East are risk factors. He believes it’s too early to discuss how much rates will be cut due to the high level of uncertainty.

Australian Employment Drops, Sending Jobless Rate Up To 3.8%:
In March, Australia saw an unexpected drop in employment and a rise in the unemployment rate, reversing some of the significant gains from the previous month. This reflects the restrictive monetary policy settings. The Australian economy lost 6,600 jobs, contrary to the predicted increase of 10,000 jobs. This followed a surge of over 100,000 jobs in February. The unemployment rate increased slightly from 3.7% in February to 3.8%.
Sean Langcake, the head of macroeconomic forecasting for Oxford Economics Australia, noted that the labour market has returned to a more normal state after several fluctuations in recent months. He added that the market remains tight, which will continue to drive labour cost growth this year.
The Australian dollar lost some of its gains after the release of this data, trading at 64.34 US cents. Meanwhile, the yield on the three-year government bond remained at 3.92%. Traders slightly increased their predictions for a November interest-rate cut from 52% to 54%.
Last month, the Reserve Bank kept its key interest rate at a 12-year high of 4.35%, waiting for data to indicate a clear path for the economy. The job figures released on Thursday, along with the quarterly inflation data due next week, will influence discussions at the bank’s policy meeting on May 6-7.
Even though the unemployment rate increased slightly, it remains below 4%, indicating that the job market is near full capacity. Bjorn Jarvis, the head of labour statistics at the Australian Bureau of Statistics, stated that the labour market was still relatively tight in March, with the employment-to-population ratio and participation rate close to their record highs.
Economists predict that the Reserve Bank will only start reducing interest rates toward the end of this year as inflation remains stubborn. The first-quarter Consumer Price Index (CPI) will be released on Wednesday, and it is expected to be lower than the 4.1% recorded in the last quarter of 2023. The Reserve Bank’s latest estimates suggest that inflation will only
return to its target range of 2-3% by late 2025, indicating that reducing prices in the final stretch will be challenging.
The employment data released on Thursday showed that annual job growth slowed to 2.4% in March, down from 4% a year earlier. Looking ahead, the Reserve Bank, which describes the labour market as still tight, expects job growth to slow down, pushing the unemployment rate to 4.4% by mid-2025. The central bank will publish its quarterly forecast update in May.

G7 Finance Leaders Pledge Cooperation on Iran Sanctions, Frozen Russian Assets:
The finance ministers and central bank governors of the G7 countries, in a joint statement, pledged to closely coordinate future actions aimed at reducing Iran’s ability to acquire, produce, or transfer weapons that could destabilise the region.
This meeting took place on the sidelines of the International Monetary Fund and World Bank spring meetings in Washington. The officials expressed that they see the risks in the global economy as more balanced due to recent resilience to various shocks and a decrease in inflation.
The G7 officials emphasised that Central Banks are strongly committed to maintaining price stability and will continue to adjust their policies based on data. They stated that price and financial stability are necessary for sustainable and balanced growth.
However, they acknowledged significant geopolitical risks, primarily from Russia’s war in Ukraine and conflicts in the Middle East, which could impact trade, supply chains, and commodity prices.
The G7 finance officials expressed their strong commitment to helping Ukraine meet its urgent short-term financing needs as it battles Russia’s invasion. This includes utilising extraordinary revenues from frozen Russian assets.
The officials reaffirmed their determination to ensure that Russia pays for the damage it has caused to Ukraine. They stated that Russia’s sovereign assets in their jurisdictions will remain frozen until then, in accordance with their respective legal systems.
While the statement did not provide a specific plan for the assets, it mentioned that they would continue exploring all possible ways to use the frozen Russian sovereign assets to support Ukraine. They aim to present options to G7 leaders at a summit in Italy in June.
Deputy U.S. Treasury Secretary Wally Adeyemo, speaking earlier on Wednesday, said that discussions about the frozen Russian sovereign assets, estimated to be about $300 billion, were still ongoing. He mentioned that finance ministers were working on options that include building a strong legal foundation for the outright seizure of the assets.
Adeyemo explained that they were considering several options, including seizure, collateralizing, or using the windfall profits or interest from these assets to fund a loan. He emphasised the importance of the U.S. working closely with European allies on this issue, as the majority of the assets are held in Europe.
French Finance Minister Bruno Le Maire stated that the G7 needed to be able to utilise the interest earned on the assets. He estimated these revenues to be between 3 billion to 5 billion euros per year, depending on the interest rates. He proposed that they should focus on understanding and defining how these funds could be used over the next month to assist Ukraine and its government.

Yellen Meets Japan, South Korea Counterparts in Bid to Boost Economic Ties:
Janet Yellen, the U.S. Treasury Secretary, along with Japanese Finance Minister Shunichi Suzuki and South Korean Finance Minister Choi Sang-mok, have agreed to continue close consultations on foreign exchange market developments. This is in line with their existing G-20 commitments. They also acknowledged the serious concerns of Japan and South Korea about the recent sharp depreciation of the Japanese yen and the Korean won.
Currency analysts in Tokyo interpret this statement as an indication that the U.S. may tolerate intervention in the market. Japanese and Korean officials have been issuing warnings as the yen has fallen about 9% against the dollar this year, and the won is roughly 7% weaker.
Keiichi Iguchi, a senior strategist at Resona Holdings Inc. in Tokyo, stated that the U.S. has effectively given the green light for intervention. This has led to increased speculation about the possibility of a coordinated intervention.
Yujiro Goto, head of currency strategy at Nomura Securities Co., suggested that it might now be easier to gain understanding for intervention. However, he added that intervention alone will not change the market trend if the fundamentals do not change.
The yen was steady around 154.30 per dollar at 10:05 a.m. in Tokyo on Thursday, having backed away from the 155 level where many traders see a heightened risk of intervention. The won strengthened about 0.6% to 1378.20 against the U.S. currency.
The dollar has strengthened against major counterparts this year as the resilient U.S. economy with sticky inflation reduced prospects for Federal Reserve interest-rate cuts.
Past agreements among members of the Group of 20 emerging and advanced economies emphasise the principle of allowing markets to determine exchange rates, while leaving the door open to action against excess market volatility.
Following the meeting on Wednesday in Washington on the sidelines of the International Monetary Fund-World Bank spring meetings, Suzuki and Masato Kanda, Japan’s top currency official, touted the agreement regarding currencies while repeating their previous talking points on the yen’s weakness.
Suzuki stated to reporters that they would like to continue to consult closely with them regarding how the foreign exchange market is developing. He also mentioned that he does not comment on specific measures to be taken, because they may have an unforeseen impact on the market.
Suzuki said that, when he explained to his counterparts that Japan’s stance remains that exchange rates should move stably in line with economic fundamentals and they will deal with any excessive moves appropriately, they listened to him very well.
Reaching Wednesday’s agreement on language about currency weakness itself was an achievement, as that hasn’t been done in recent years, Kanda said.
Before Wednesday’s meeting, both South Korean and Japanese officials had aired concerns about their currencies slumping to multi-year lows against the dollar this week. Choi and Suzuki expressed “serious concerns” over the recent weakening of their currencies and warned of taking appropriate steps to counter any drastic volatility, South Korea’s government said in a statement after a bilateral meeting between the two.
The three also on Wednesday confirmed their commitment to coordinate on sanctions against Russia and North Korea and collectively deal with issues regarding supply-chain vulnerabilities, economic coercion and overcapacity.

Sources :
– CNBC, Bloomberg, Reuters, Fastbull, Yahoo Finance, CNN, ForexFactory News, Myfxbook News etc

Prepared to you by “Akif Matin“

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