Per the World Bank’s latest forecast, the global economy is expected to grow by just 1.7% in 2023, down from the bank’s 3% prediction last June.
But even that number is flattered by China’s predicted growth of over 4%, whereas Western economies could more or less grind to a standstill.
Yet Swissquote analysts warned against taking this as a sign of looser economic policy in the US: “Inflation, though easing, remains more than three times higher than the Fed’s 2% target. This means that the Fed will continue hiking rates even if it means slower economic growth.”
It’s all leading to a general lack of direction in the markets, exasperated by Fed chair Jerome Powell’s silence on the bank’s direction.
Tomorrow’s US inflation data will surely be hotly anticipated.
The US Dollar Index (DXY) closed flat at 102.89 on Tuesday following three straight days of meaty losses, though the spinning top candlestick pattern showed clear indecision among traders.
Indecision continued in this morning’s Asia trading window. At the time of writing, DXY was a few basis points lower at 102.77, but there was no clear bearish advantage.
Cable was seen higher following a bearish end to Tuesday’s trading session which saw the pair close 30 pips lower at 1.215 before adding 0.2% to 1.217 this morning.
GBP/USD seen higher, yet investor sentiment is mixed – Source: capital.com
The euro maintains a seven-month high against the greenback, with the EUR/USD pair currently changing hands at 1.074.
Benefitting euro bulls, European Central Bank board member Isabel Schnabel made hawkish comments in her Tuesday speech on green policy. “Inflation will not subside by itself," she said, adding: “To resolve today’s inflation problem, financing conditions will need to become restrictive” and so forth.
EUR/GBP had a strong Tuesday session, closing 30 bps higher at 88.35p, with further upside to 88.38p seen in this morning’s Asia session.