investor confidence

Last month's elections in Poland have been a game-changer for the country's future and its relationship with Europe. In this bundle of articles, we look at the incoming coalition's main priorities, examine the fiscal space for its election pledges and discuss the prospects for unlocking more EU funds


Poland’s general election result on 15 October has opened new economic growth opportunities, even though the external environment is still unfavourable. The commitments of the new coalition bode well for the rule of law, market re-orientation and Foreign Direct Investment attractiveness. We're not yet done with the campaigning; we still have local government, European and Presidential elections still to come.

The fiscal side should remain expansionary. But we see low-hanging fruit, which the new government may use to restore higher potential growth and gradually rebalance its structure toward investments rather than consumption. We see great potential in unlocking private outlays after

BOJ's Ueda: 2% Inflation Target Not Yet Achieved as USD/JPY Pushes Above 149

Core Inflation Pressures Favor Hawkish Stance by ECB Officials Amid Uncertainty and Political Risks

ING Economics ING Economics 30.05.2023 08:43
Unacceptably high core price dynamics will lend a helping hand to ECB officials pushing for a hawkish line The most likely outcome to this week's inflation releases, still unacceptably high core price dynamics, will lend a helping hand to ECB officials pushing for a hawkish line.   Warnings that hikes may have to continue until September will stand a better chance of pushing longer term rates higher even if a subdued economic outlook, and growing doubts about the strength of China's post Covid recovery, should prevent European rates from rising as quickly as their US peers in the coming weeks. Wider USD-EUR rates differentials should only be a temporary development, however, and one resulting from a rise in global rates.   Market participants who, like us, expect lower rates into year-end, should also consider the possibility of US rates falling faster than their European peers, perhaps to sub-100bp levels for 10Y Treasury-Bund spreads.   This is all the more true since European markets have to contend with another dollop of political uncertainty in the form of early Spanish general elections on 23 July. The prime minister called for a vote after local elections defeat at the weekend and the opposition party PP is on the front foot, although it would likely rely on a coalition with another party due to the fragmented nature of the Spanish political landscape.   Spain’s still wide budget deficit (the European commission forecasts 4.1% of GDP this year and 3.3% next) mean a period of uncertainty is an unwelcome development and could lead to underperformance of Spanish government bonds vs peers such as Portugal and Italy.   Early elections mean Spanish bonds are at risk of underperformance vs Italy and Portugal   Today's events and market view Spain kicks off this week’s inflation releases. This will come on top of Eurozone monetary aggregate data and the European Commission’s confidence indicators for the month of May. One theme in European macro releases has been the softening of survey-based data, such as Germany’s Ifo (see above).   US releases feature house prices, the conference board’s consumer confidence, and the Dallas Fed manufacturing activity index.   Bond supply will take the form of Italian 5Y, 10Y fixed rate bonds, as well as 5Y floating rate bonds.    
Treading the Yield Curve: Hawkish Signals and Rate Dynamics

Underestimating the Hawkish Fed: Market Expectations vs. FOMC's Projected Scenario

Alex Kuptsikevich Alex Kuptsikevich 15.06.2023 13:54
In our conversation with an FXPRO analyst about the current market situation, several key topics were discussed. Regarding the recent FOMC decision, it appears that markets are underestimating the Fed's hawkish rhetoric. Despite leaving the Fed Funds rate unchanged, the FOMC's published forecasts suggest two more rate hikes this year and an extended period without policy easing. However, investor confidence in Powell's economic assessment is at a record low. This disparity between market expectations and the Fed's projected scenario is evident in the bond market pricing, with the most likely FOMC scenario priced at a mere 8.4%.   Interestingly, this misplaced investor confidence in a less hawkish Fed is driving equity gains, reminiscent of a similar scenario in January when regional banking issues dashed market optimism. The market's detachment from reality is leading to a disregard for the Fed's rate guidance and the tightening measures already implemented.   FXMAG.COM: Could you please comment on the FOMC decision? FXPRO analyst: Markets continue to underestimate the Fed's hawkish rhetoric. After leaving the Fed Funds rate unchanged, the FOMC has published forecasts suggesting two more 25 basis point hikes this year and an extended period without policy easing. However, investors' confidence in Powell's economic assessment is at a record low (36% vs. 74% for Greenspan in 2001). The most likely FOMC scenario - two more rate hikes before the end of the year - is priced by the bond market at only 8.4%, according to the FedWatch tool. Indeed, this investor confidence that the Fed will be less hawkish than it promises is fueling equity gains. We saw something similar in January when regional banking problems dashed market optimism. Markets have become too detached from reality, ignoring both the Fed's direct rate guidance (which is within its power) and the economic logic and the policy tightening that has already occurred.     FXMAG.COM: Could you please comment on the ECB decision?  FXPRO analyst: Despite six months of economic contraction, the ECB is quite open about its intentions to fight inflation. We expect another 25-point hike on Thursday, and the tone supports at least a couple more. This is a more hawkish stance than that of the Fed. Moreover, we do not rule out hawkish surprises from the ECB today and in the coming weeks. It should not be forgotten that continental Europe is historically less inflation-tolerant than the US and the UK. This could be fuel for a stronger euro in the coming months.     FXMAG.COM: Could you give your point of view about how the gold prices would behave in the next weeks? Is there a chance that there will be new ATH? FXPRO analyst: Gold retreated to $1930, a level not seen since March when the US regional banking crisis triggered a rally in precious metals and major cryptocurrencies. A pullback on the shoulders of rising equities has forced gold to give back more than half the amplitude of the March-May rally. Despite the retreat, gold still has the potential to grow from current levels to $2100 by the end of the year. A central argument against this bullish scenario would be a break below $1920 in the coming days, a significant reversal area.  
China's Gold Reserves Surge: Insights into Metals Trade Data

Resilient US Economy and Market Recovery Driven by Future Rate Cut Expectations, Technology Sector, and Low Inflation

Maxim Manturov Maxim Manturov 29.06.2023 14:01
According to the CME FedWatch tool, markets are currently seeing a ~74% probability that a hike will not take place at the Fed monetary policy committee meeting in June. In addition, expectations of future rate cuts closer to the end of 2023 and continued rate cuts through 2024 are increasing, further boosting investor sentiment, supporting valuations of technology companies, growth sectors in general and contributing to the upward trajectory of the market.   Lower inflation has also played a role in the positive market performance. Inflationary pressures continue to fall, allowing consumers to maintain their purchasing power and businesses to plan for the future with greater certainty, removing uncertainty about inflation. This favourable inflation environment has strengthened investor confidence in the resilience of the economy in the 2nd half of the year, given the expected policy shift from the Fed. Moreover, the US economy has demonstrated its resilience, continuing to show growth despite relatively high interest rate levels. Key economic indicators such as GDP growth, employment figures, labour market strength and consumer spending are showing signs of stability, indicating sustained and balanced economic growth. Expectations of a soft economic landing have allayed fears of a prolonged recession and laid a solid foundation for market recovery.
Spanish Elections and Economic Policy: Uncertainty and Growth Outlook

Spanish Elections and Economic Policy: Uncertainty and Growth Outlook

ING Economics ING Economics 12.07.2023 14:14
The outcome of the Spanish elections could lead to changes in economic policy. However, the reactivation of European fiscal rules in 2024 limits the extent to which fiscal policy can be adjusted, limiting the risk to our growth outlook.   Uncertainty surrounding Spanish elections Following major losses in the recent regional and local elections on 28 May, Prime Minister Pedro Sanchez of the Socialist Workers' Party (PSOE) has called for early elections in Spain. Although the latest polls indicate a shift to the right side of the political spectrum, the outcome of the upcoming elections remains uncertain. If the polls are correct, the conservative People's Party (Partido Popular) will get the most votes, but not the majority to form a government. In such a scenario, the third-largest party, the far-right Vox, will play a decisive role in forming a government. As elections approach in Spain, the political landscape is characterised by high fragmentation and polarisation. Over the past decade, the Spanish political landscape has undergone a significant transformation, with a remarkable increase in the number of parties. This fragmentation has led to greater instability as coalition governments must now be formed, which often rely on a fragile consensus. Based on the latest polls, it seems likely that another coalition government will have to be formed.     How the Spanish election could affect the economic outlook Spain's economy has outperformed that of other eurozone countries over the past year, but is still weighed down by structural weaknesses such as high debt, low productivity and a rigid labour market. Despite a historically low unemployment rate, it is still among the highest in the eurozone and youth unemployment is alarmingly high. Moreover, the country has still not fully recovered from the pandemic, despite last year's impressive growth figures. The elections could also be the starting point of a longer period of political instability, although this is not our baseline scenario. This could happen if the election results make it difficult to form a stable majority, leading to protracted government negotiations. In addition, there is still a real possibility that a clear majority cannot be formed, which would lead to a hung parliament necessitating new elections and prolonging political uncertainty. In such a scenario, crucial structural reforms needed for the economy may be delayed, reinforcing existing weaknesses. Persistent uncertainty about future government policies could also undermine investor confidence and hamper investment activities. If a new right-wing government comes to power, it could bring about a change of course in economic policy. Conservative leader Feijóo has already announced plans for more business-friendly policies and tax cuts, including a proposed income tax cut for people earning less than €40,000 a year. There is also a real chance that the planned closure of nuclear power plants in 2027 will be postponed to secure energy supplies. The extent of these policy shifts will depend on the consensus among coalition partners and the strength of their majority. If the right-wing Conservatives and Vox form a comfortable majority, they will feel more supported to reverse certain previous government policies. Despite a possible change of direction in economic policy, there is little room to shift to a more stimulative fiscal policy. Spain's public debt ratio is one of the highest in the eurozone at 113.2%. Spain ranks below Greece (171.3%), Italy (144.4%) and Portugal (113.9%). According to current forecasts, Spain will overtake Portugal in the ranking this year. This shift is due to a lower expected government deficit in Portugal combined with slightly better growth prospects. Spain recorded a deficit of 4.8% of GDP in 2022, and both our forecast and that of the Bank of Spain suggest that the deficit will remain above the 3% threshold at least until 2025. This level is considered an excessive deficit by the European Commission. The reactivation of European fiscal rules in 2024 will increase pressure on fiscal consolidation measures. Regardless of the election outcome, addressing public finances will be inevitable, further limiting the government's flexibility to pursue more expansionary fiscal policies.   Government debt to GDP ratio, 2022   New government will take office amid a slowing economy Spain's economy was the fastest-growing of all larger eurozone countries in the first quarter, growing 0.6% quarter-on-quarter. Like other southern countries, Spain benefited from growth in net exports driven by a continued rebound in tourism. In addition, the Spanish economy benefited from some structural differences, such as a relatively smaller industrial sector compared to, for instance, Germany. It is precisely this energy-intensive industry that has suffered the most from higher energy prices and tightening financial conditions. Finally, Spanish energy prices, partly due to the introduction of the gas price cap, have not risen as much as in several other countries. Despite the good start, maintaining this positive momentum may be challenging. Although several factors such as a pick-up in wages, improvements in global supply chains, falling energy prices, and government support packages are giving some tailwind, the tightening of financial conditions will increasingly cast a shadow on the economy. It is hard to imagine that the rapid and significant increase in policy interest rates will not significantly slow economic growth. The external environment is also expected to weaken further, with the eurozone experiencing a technical recession over the past two quarters, China's economic recovery falling short of expectations and US growth expected to slow. This could also affect Spain's tourism sector. A slowdown in the global economy could lead to less international travel, limiting the growth of the tourism sector in 2024.   Spain recorded the strongest growth among larger euro countries in the first quarter      
Spanish Elections and Growth Outlook: Limited Impact Expected

Spanish Elections and Growth Outlook: Limited Impact Expected

ING Economics ING Economics 13.07.2023 09:16
Spanish elections unlikely to hamper growth outlook The outcome of the Spanish elections could lead to changes in economic policy. However, the reactivation of European fiscal rules in 2024 limits the extent to which fiscal policy can be adjusted, limiting the risk to our growth outlook.   Uncertainty surrounding Spanish elections Following major losses in the recent regional and local elections on 28 May, Prime Minister Pedro Sanchez of the Socialist Workers' Party (PSOE) has called for early elections in Spain. Although the latest polls indicate a shift to the right side of the political spectrum, the outcome of the upcoming elections remains uncertain. If the polls are correct, the conservative People's Party (Partido Popular) will get the most votes, but not the majority to form a government. In such a scenario, the third-largest party, the far-right Vox, will play a decisive role in forming a government. As elections approach in Spain, the political landscape is characterised by high fragmentation and polarisation. Over the past decade, the Spanish political landscape has undergone a significant transformation, with a remarkable increase in the number of parties. This fragmentation has led to greater instability as coalition governments must now be formed, which often rely on a fragile consensus. Based on the latest polls, it seems likely that another coalition government will have to be formed.   How the Spanish election could affect the economic outlook Spain's economy has outperformed that of other eurozone countries over the past year, but is still weighed down by structural weaknesses such as high debt, low productivity and a rigid labour market. Despite a historically low unemployment rate, it is still among the highest in the eurozone and youth unemployment is alarmingly high. Moreover, the country has still not fully recovered from the pandemic, despite last year's impressive growth figures. The elections could also be the starting point of a longer period of political instability, although this is not our baseline scenario. This could happen if the election results make it difficult to form a stable majority, leading to protracted government negotiations. In addition, there is still a real possibility that a clear majority cannot be formed, which would lead to a hung parliament necessitating new elections and prolonging political uncertainty. In such a scenario, crucial structural reforms needed for the economy may be delayed, reinforcing existing weaknesses. Persistent uncertainty about future government policies could also undermine investor confidence and hamper investment activities. If a new right-wing government comes to power, it could bring about a change of course in economic policy. Conservative leader Feijóo has already announced plans for more business-friendly policies and tax cuts, including a proposed income tax cut for people earning less than €40,000 a year. There is also a real chance that the planned closure of nuclear power plants in 2027 will be postponed to secure energy supplies. The extent of these policy shifts will depend on the consensus among coalition partners and the strength of their majority. If the right-wing Conservatives and Vox form a comfortable majority, they will feel more supported to reverse certain previous government policies. Despite a possible change of direction in economic policy, there is little room to shift to a more stimulative fiscal policy. Spain's public debt ratio is one of the highest in the eurozone at 113.2%. Spain ranks below Greece (171.3%), Italy (144.4%) and Portugal (113.9%). According to current forecasts, Spain will overtake Portugal in the ranking this year. This shift is due to a lower expected government deficit in Portugal combined with slightly better growth prospects. Spain recorded a deficit of 4.8% of GDP in 2022, and both our forecast and that of the Bank of Spain suggest that the deficit will remain above the 3% threshold at least until 2025. This level is considered an excessive deficit by the European Commission. The reactivation of European fiscal rules in 2024 will increase pressure on fiscal consolidation measures. Regardless of the election outcome, addressing public finances will be inevitable, further limiting the government's flexibility to pursue more expansionary fiscal policies.   Government debt to GDP ratio, 2022  
EUR/USD Trading Analysis and Tips: Navigating Signals and Volatility

EUR/USD Trading Analysis and Tips: Navigating Signals and Volatility

InstaForex Analysis InstaForex Analysis 07.08.2023 09:50
Analysis of transactions and tips for trading EUR/USD The test of 1.0961 on Friday afternoon, coinciding with the rise of the MACD line from zero, prompted a buy signal that led to a price increase of over 40 pips.     Reports on the volume of orders in Germany and industrial output in France and Italy did not help euro rise last Friday. However, weak data on the US labor market favored bullish traders, leading to a sharp increase in EUR/USD during the US trading session. Today, pressure may return on the pair, unless the data on industrial production in Germany and investor confidence in the eurozone show very good values. Although disappointing reports will continue the pair's decline, a lower-priced euro will certainly attract more buyers.   For long positions: Buy when euro hits 1.0989 (green line on the chart) and take profit at the price of 1.1035. Bullish traders will return to the market in the event of very good reports on the eurozone. However, before buying, ensure that the MACD line lies above zero or just starting to rise from it. Euro can also be bought after two consecutive price tests of 1.0960, but the MACD line should be in the oversold area as only by that will the market reverse to 1.0989 and 1.1035   For short positions: Sell when euro reaches 1.0960 (red line on the chart) and take profit at the price of 1.0919. Pressure will intensify in the case of weak data from the eurozone. However, before selling, ensure that the MACD line lies below zero or drops down from it. Euro can also be sold after two consecutive price tests of 1.0989, but the MACD line should be in the overbought area as only by that will the market reverse to 1.0960 and 1.0919.     What's on the chart: Thin green line - entry price at which you can buy EUR/USD Thick green line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further growth above this level is unlikely. Thin red line - entry price at which you can sell EUR/USD Thick red line - estimated price where you can set Take-Profit (TP) or manually fix profits, as further decline below this level is unlikely.   MACD line- it is important to be guided by overbought and oversold areas when entering the market Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decision based on the current market situation is an inherently losing strategy for an intraday trader.    
Navigating Disclosure and Standardisation: Policy Amidst Turbulence in Sustainable Finance Market

Navigating Disclosure and Standardisation: Policy Amidst Turbulence in Sustainable Finance Market

ING Economics ING Economics 10.08.2023 08:35
Policy is still pointing at greater disclosure transparency and standardisation despite turbulence As mentioned above, transparent and standardised sustainability reporting is essential in assuring the credibility of an issuer’s ESG products, helping to boost investor confidence, and to drive the healthy growth of the global sustainable finance market. Policies and initiatives need to play a role here, and we are seeing more efforts ramped up in this area. In late June, the International Financial Reporting Standards Foundation’s International Sustainability Standards Board (ISSB) launched its sustainability and climate disclosure standards. The ISSB signals an important convergence of different reporting standards and frameworks such as the Taskforce on Climate-related Financial Disclosure (TCFD), offering companies an overarching framework. Already having support from G7 and G20 countries, the ISSB is expecting wide adoption over time.   The EU has a relatively more unified ESG policy environment, where disclosure requirements (Corporate Sustainability Reporting Directive, or CSRD), the sustainable activity classification system (Taxonomy) and the Green Bond Standard reinforce each other. Admittedly, complying with all the regulatory requirements can meet difficulties around necessary data and interpretation. And many of the bloc’s policies are still evolving, with the newly adopted European Sustainability Reporting Standards (ESRS) introducing more flexibility around ESG materiality and Scope 3 emissions disclosure. Still, the EU’s more established and complex ESG system can support smoother growth in sustainable finance issuance. In the US, although more than 30 states have passed or proposed anti-ESG investment bills, the Securities and Exchange Commission (SEC) is slowly advancing in mandating climate-related disclosure and aims to release the final proposed rules this October. The final rules will likely allow more flexibility – for instance, Scope 3 emissions data may no longer be required. Even if less strict relative to original plans, these rules will be revolutionary for the US market, facilitating a large step closer to European and other peers. In Asia, several economies already have their own guidelines and taxonomies, such as Japan’s green, social, and climate transition finance guidelines, China’s Green Bond Principles, South Korea’s Korea Green Taxonomy, etc. Yet Asia is more of a follower rather than a trend setter, and several jurisdictions have adopted the EU’s system, or the widely accepted international frameworks. The ISSB is likely to have a considerable impact on APAC – Singapore, for instance, has already proposed ISSB-aligned disclosure from listed companies starting in 2025. Nevertheless, we would expect more lenient local specifications in policy setting. For example, the Association of Southeast Asian Nations’ (ASEAN’s) taxonomy considers certain types of coal phase-out activities to be aligned.   What does this mean for investors and issuers? Quality issuance is the best strategy against uncertainty. As the sustainable finance market moves from the initial period of rapid growth to a maturing phase with more ESG disclosure mandates and scrutiny, it has become important for issuers to navigate through greenwashing risks by actively leveling up their sustainability credibility. Investors have started to and will increasingly favor quality issuers with ambitious long-term ESG targets, clear interim targets, rigorous progress reporting, as well as detailed disclosure of capital allocation from their sustainable finance products. Environmental, Social, and Governance aspects will all progress, but the urgency to reduce emissions and mitigate climate risks will remain a strong source of demand for sustainable financing. This can help promote innovation and facilitate the commercialization of nascent decarbonization technologies. We are in an era of adjustment and normalisation, but sustainable finance remains a crucial tool to provide financial support for sustainable activities. Therefore, we do see the market continuing to grow in the future.
Romania's Economic Growth Slows in Q2, Leading to Lower 2023 Forecasts

Assessing the Risk of Prolonged Economic Stagnation in China - Insights by Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank

Ipek Ozkardeskaya Ipek Ozkardeskaya 11.08.2023 08:09
Is China on path for longer economic stagnation?  By Ipek Ozkardeskaya, Senior Analyst | Swissquote Bank   Released yesterday, the latest CPI data showed that the headline inflation in the US ticked higher from 3 to 3.2%. That was slightly lower than the 3.3% penciled in by analysts, core inflation eased to 4.7% in July from 4.8% expected by analysts and printed a month earlier.   But the rising energy and crop prices threaten to heat things up in the coming months and inflation's downward trajectory could rapidly be spoiled. That's certainly why an increasing number of investors and the Federal Reserve's (Fed) Mary Daly warned that this was 'not a data point that says victory is ours'.   And indeed, looking into details, the fact that the 20% fall in gasoline prices is what explains the decline in headline number is concerning. The barrel of US crude bounced lower yesterday after a 27% rally since the end of June, and the latest OPEC data indicated that we would see a sharp supply deficit of more than 2mbpd this quarter as Saudi cuts output to push prices higher. And this gap could further widen as global demand continues growing and shift to alternative energy sources is nowhere fast enough to reverse that upside pressure.   On the other hand, we also know that the rising energy prices fuel inflation expectations and further rate hikes expectations around the world. And that means that oil bears are certainly waiting in ambush to start trading the recession narrative and sell the top. The $85pb could be the level that could trigger that downside correction despite the evidence of tightening supply and increasing gap between rising demand and falling supply.   Today, eyes will be on the July PPI figures before the weekly closing bell, where core PPI is seen further easing, but headline PPI may have ticked higher to 0.7% on monthly basis, probably on higher energy, crop and food prices.     In the market  Yesterday's slightly softer-than-expected inflation numbers and the initial jobless claims which printed almost 250K new applications last week - the highest in a month - sent the probability of a September pause to above 90%, though the US 2-year yield advanced past the 4.85% level, and the longer-terms yields rose with a weak 30-year bond action, which saw the highest yield since 2011.   Major stock indices stagnated. The S&P500 was up by only 0.03% yesterday while Nasdaq 100 closed 0.18% higher, as Walt Disney rallied as much as 5% even though Disney+ missed subscription estimates and said that it will increase the price of the streaming service. Disney is considering a crackdown on password sharing, which, combined with higher prices could lead to a Netflix-like profit jump further down the road.     In the FX  The USD index consolidates above the 50 and 100-DMAs and just below a long-term ascending channel base. The EURUSD sees support at the 50-DMA, near the 1.0960 level, and could benefit from further weakness in the US dollar to attempt another rise above the 1.10 mark.   European nat gas futures fell 7% yesterday after a 28% spiked on Wednesday on concerns that strikes at major export facilities in Australia could lead to a 10% decline in global LNG exports. Yet, the European inventories are about 88% full on average and the industrial demand remains weak due to tightening financial conditions imposed by the European Central Bank (ECB) hikes. Therefore this week's massive move seems to be mostly overdone, and we shall see some more downside correction.     Chinese property market is boiling  The property crisis in China is being fueled by a potential default of Country Garden, which is one of the biggest property companies in China and which recently announced that it may have lost up to $7.6bn in the first half of the year as home sales slumped and the government stimulus measures didn't bring buyers back to the market. Equities in China slumped further today, as property crisis is not benign. In fact, China's local governments have plenty of debt, and their major source of income is... land and property sales. Consequently, the property crisis explodes local governments' debt to income ratios- And the debt burden prevents China from rolling out stimulus measures that they would've otherwise, because the government doesn't want to further blast the debt levels.   Shattered investor and consumer confidence, shrinking demographics, property crisis and deflation hints that the Chinese economy could be on path for a longer period of economic stagnation. We could therefore see rapid pullback in investor optimism regarding stimulus measures and their effectiveness. Hang Seng's tech index fell to the lowest levels in two weeks yesterday, as all members fell except for Alibaba which jumped after beating revenue estimates last quarter.   
China's Supportive Measures and Metals Market Outlook

China's Supportive Measures and Metals Market Outlook

ING Economics ING Economics 29.08.2023 10:10
Metals – Supportive measures from China China announced some measures on Monday to support the economy and financial markets. Beijing has reduced the stamp duty on stock trading by 50% (from 0.1% to 0.05%), with the Chinese Securities Regulatory Commission also approving new retail funds to increase capital inflow and tightening IPO regulations to boost confidence among investors. Meanwhile, the National Development and Reforms Commission also pledged to increase private investments in the construction of national and key infrastructure projects including transportation, advanced manufacturing, and modern agriculture facilities among others. In addition, China announced some measures to support the flailing property sector. These measures have helped broader sentiment in financial markets. This is likely to see LME metals opening stronger today, with yesterday a bank holiday in the UK. Spot gold has managed to edge higher in recent days with the market reacting to hints from Jackson Hole that the Federal Reserve will likely keep rates unchanged at its September FOMC meeting. However, we could see some renewed pressure later in the year, with the market still coming around to the idea that the Fed may have to hike rates at least one more time later in the year. This continues to support the US dollar and treasury yields. However, we will need to keep a close eye on US data releases in the coming weeks, which could shed more light on what the Fed may do. This starts with the US jobs report on Friday. Despite strength in recent days, gold ETFs have seen 13 consecutive weeks of outflows. In addition, CFTC data show that over the last reporting week, speculators cut their net long in COMEX gold by 20,845 lots over the week to 25,695 lots, the lowest levels since March.
Turbulent FX Markets: Peso Strength, Renminbi Weakness, and Dollar's Delicate Balance

Turbulent FX Markets: Peso Strength, Renminbi Weakness, and Dollar's Delicate Balance

ING Economics ING Economics 01.09.2023 10:28
FX Daily: Peso too strong, renminbi too weak, dollar just right FX markets await today's release of the August US jobs report to see if we've reached any tipping point in the labour market. Probably not. And it is still a little too early to expect the dollar to embark on a sustained downtrend. Elsewhere, policymakers in emerging markets are addressing currencies that are too weak (China) and too strong (Mexico).   USD: The market seems to be bracing for soft nonfarm payrolls data Today's focus will be the August nonfarm payrolls jobs release. The consensus expects around a +170k increase on headline jobs gains, although the "whisper" numbers are seemingly nearer the +150k mark. Importantly, very few expect much change in the 3.5% unemployment rate. This remains on its cycle lows, continues to support strong US consumption, and keeps the Fed on its hawkish guard. We will also see the release of average hourly earnings for August, which are expected to moderate to 0.3% month-on-month from 0.4%. As ING's US economist James Knightley notes in recent releases on the US economy and yesterday's US data, there are reasons to believe that strong US consumption cannot roll over into the fourth quarter and that a recession is more likely delayed than avoided. But this looks like a story for the fourth quarter. Unless we see some kind of sharp spike higher in unemployment today, we would expect investors to remain comfortable holding their 5.3% yielding dollars into the long US weekend. That is not to say the dollar needs to rally much, just that the incentives to sell are not here at present. If the dollar is at some kind of comfortable level, policy tweaks in the emerging market space over the last 24 hours show Beijing trying to fight renminbi weakness and Mexico City trying to fight peso strength (more on that below). We suspect these will be long, drawn-out battles with the market. DXY can probably stay bid towards the top of a 103-104 range.
Eurozone Economic Data Signals Stalling Economy Amid Lingering Employment Resilience

Poland's Post-Election Landscape: Economic Opportunities, Fiscal Priorities, and EU Funds Unlocking

ING Economics ING Economics 03.11.2023 14:56
Last month's elections in Poland have been a game-changer for the country's future and its relationship with Europe. In this bundle of articles, we look at the incoming coalition's main priorities, examine the fiscal space for its election pledges and discuss the prospects for unlocking more EU funds Poland’s general election result on 15 October has opened new economic growth opportunities, even though the external environment is still unfavourable. The commitments of the new coalition bode well for the rule of law, market re-orientation and Foreign Direct Investment attractiveness. We're not yet done with the campaigning; we still have local government, European and Presidential elections still to come. The fiscal side should remain expansionary. But we see low-hanging fruit, which the new government may use to restore higher potential growth and gradually rebalance its structure toward investments rather than consumption. We see great potential in unlocking private outlays after a few years of local businesses staying in “standby” mode amid high profits. Also, Poland may unlock EU money from the Recovery and Resilience Facility and a new EU budget while attracting FDI investors who perceive Poland as the number one destination for nearshoring but who've been staying on the sidelines. Also, we expect more actions in lagged energy transition, infrastructure, and human capital - while enhancing governance in State Owned Enterprises and other institutions. In this bundle of three articles, we discuss five broad priorities for the new coalition, estimate the available fiscal space for its election pledges on top of already record-high borrowing needs in 2024, and discuss prospects for unlocking EU funds. Poland’s return to the European mainstream and burying the hatchet in the legal conflict with the European Commission should unlock money from the RRF. Two years ago, it was aimed to support post-Covid recovery; in the current context of economic stagnation, it will serve even better as a counter-cyclical measure. The incoming government is ahead of an ambitious task in transforming serious competitiveness, security and climate challenges into new growth engines of the Polish economy through large investment programmes in the military, for energy, infrastructure, and human capital. While waiting for the confidence vote in the Lower Chamber of Parliament in the coming weeks, we think the FX and FI markets reflect investor confidence that massive underweight positions in Polish Government Bonds are no longer justified right now.

currency calculator