Forex News for 27 Feb, 2023
- Inflation is increasing globally due to disruptions in supply chains caused by COVID-19 and a shift towards domestic production. Russia’s attack on Ukraine has further worsened inflation, particularly in energy and agricultural exports.
- Investors are turning to assets that offer explicit inflation protection, such as TIPS and index-linked gilts.
- Commodity markets, particularly oil, have also seen gains, as they tend to perform well during inflationary times. Investors are moving away from holding cash, as rising prices erode its spending power, and instead seek real assets such as real estate, land, fine art, and wine.
- Inflation trading and investing strategies differ, with traders looking to profit from future price rises through bets on gold derivatives, gold indexes, and a rising US dollar against other currencies. In contrast, inflation investors may opt for physical gold as an inflation hedge.
- Central banks aim to bring down inflation: Despite the current high levels of inflation, central bank mandates to bring it down remain in place.
- Long-term forecasts for US inflation tend to settle around the 2-2.5% mark. However, it is expected to take time for prices to come back into line, as there is a time lag between interest rates rising and their impact on prices.
- Polish refiner PKN CEO Orlen shared on Saturday that Russia halted its oil supplies to Poland. This move could lead to supply shortages in Poland and have knock-on effects on other European countries.
- New Zealand’s retail sales fell by 0.6% in Q4, after a surprise 0.6% increase in Q3 2022. This decline indicates that the country’s economy may be experiencing some slowdown, which could have implications for its monetary policy
- The People’s Bank of China (PBOC) slashed its daily midpoint fix from 6.8942 to 6.9572. This move represents the biggest weakening of the onshore yuan and dragged the currency to its lowest level against the dollar since December 30.