Contraction of the Japanese Economy

Contraction of the Japanese Economy in the First Quarter

The Japanese economy contracted in the first quarter of the year,
posing challenges for the Bank of Japan as it seeks to raise interest rates from near-zero levels.

 

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The Japanese Cabinet Office released preliminary GDP data indicating an annual contraction of 2.0% from January to March, compared to the previous quarter. This decline was more significant than the economists’ forecast of a 1.5% drop.

 

On a quarterly basis, GDP fell by 0.5%, slightly above the expected 0.4% decline. Private consumption, which accounts for more than half of Japan’s economic activity, dropped by 0.7%, a sharper decline than the anticipated 0.2%. This marks the fourth consecutive quarter of declining private consumption, the longest period of decline since 2009.

 

Capital expenditure, another critical growth component, decreased by 0.8% in the first quarter. This decline occurred despite significant corporate profits and was slightly more than the economists’ forecasted 0.7% drop. Moreover, external demand, calculated by subtracting imports from exports, subtracted 0.3 percentage points from the first quarter GDP figures.

 

Policymakers are looking forward to upcoming wage increases and income tax cuts, scheduled to begin in June, to help revive weak consumer spending. Additionally, they expect the effects of the earthquake that struck the Noto region earlier this year and the halting of operations at Toyota’s Daihatsu unit to diminish over time.

 

The Japanese yen has seen a sharp decline to levels not seen since 1990, raising concerns about increased living costs and additional pressure on consumer spending. The Bank of Japan took a significant step in March by raising interest rates for the first time since 2007, moving away from negative interest rates. However, given the fragile state of the economy, the central bank is expected to proceed cautiously in easing monetary conditions.

 

 

Contraction of the Japanese Economy in the First Quarter

The Dollar’s Decline During Yesterday’s Trading

The Dollar’s Decline During Yesterday’s Trading

The dollar saw a decline on Thursday as traders focused on evaluating the future outlook for interest rates in the United States. This came following statements from officials at the Federal Reserve, which increased expectations that the tightening of monetary policy might continue for a longer period.

 

 

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The Dollar

The dollar has experienced rises in recent weeks, after US economic data showed a series of strengths, which led to reduced expectations for interest rate cuts in the near future. Rising tensions in the Middle East have added to the dollar’s appeal as a safe haven. The strength of the dollar has impacted currency markets, leading to the continued decline of the yen, which is approaching its lowest levels in 34 years. These movements have sparked warnings from Japanese authorities about possible intervention. Emerging market currencies are facing pressure.

 

 

 

Bitcoin

Potential Decline in Bitcoin Price:

According to a research report from the prominent American investment bank J.P. Morgan, it is expected that the price of Bitcoin will decline following the anticipated halving event. This event occurs every four years and leads to a slowdown in the growth rate of Bitcoin supply. This reduction is expected to occur around April 19 to 20. The bank predicts a drop in the price of the world’s largest cryptocurrency after the halving, due to conditions of overbuying in the market, according to its analysis of open interest in Bitcoin futures contracts. Furthermore, the current price of Bitcoin, around $61,453, remains higher than the bank’s estimate based on gold price volatility, which it values at $45,000, and the expected production cost of Bitcoin after the reduction, estimated at $42,000. In the past, the production cost of Bitcoin was considered the floor for its prices.

 

 

 

 

Gold

Continued Rise in Gold Prices:

Gold prices rose during the trading session on Thursday, as a result of escalating risks related to the conflict in the Middle East, which increased the appeal of the yellow metal as a safe haven. However, these developments cast a shadow over the expectations related to longer-term interest rate increases in the United States. Uncertainty on the geopolitical front supports the prevailing upward trend in gold prices. Also, the continued rise in U.S. interest rates for an extended period may pressure the ongoing support for gold. However, we might see some enhancements and potential retreats in the short term. The rise in interest rates reduces the attractiveness of holding gold bullion, which does not provide a financial return.

 

 

The Dollar’s Decline During Yesterday’s Trading

 

Euro rises against the dollar on expectations of U.S. interest rate cuts

Euro rises against the dollar on expectations of U.S. interest rate cuts

The euro rose against the dollar on Wednesday, hitting its highest level in six months,
after the U.S. Federal Reserve signaled it could cut interest rates in 2024.

 

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Hopes for U.S. rate cuts lift euro to six-month high

Seasonal gains boost euro

 

 

 

 

Hopes for U.S. rate cuts lift euro to six-month high

The euro jumped 0.3% to $1.107, its highest level since July 2023.
The euro has risen 3.4% this year,
with most of the gains coming in recent weeks after the Fed hinted it may halt rate hikes sooner than expected.

“Yields are lower, stocks are higher, and risk appetite is still there,
and markets are looking for the Fed to ease by spring,” said Kit Juckes,
chief foreign exchange strategist at Societe Generale in London.

 

 

 

Seasonal gains boost euro

Other European currencies also rose against the dollar,
with the Swiss franc up 0.2% to $0.992 and the pound up 0.2% to $1.224.

The dollar fell against most other currencies, with the dollar index,
which measures the value of the dollar against a basket of six major currencies, down 0.4% to 101.02.

“The holiday-related gains will fade a bit as we head into the first quarter,”
said Helen Given, a foreign exchange trader at Monex USA.
“The euro looks to be in overbought territory, and with the German economy teetering on the brink,
the risk of a regional recession seems a bit higher than it does here in the U.S.”

As for the dollar, there is also a strong seasonal tendency for it to weaken at the end of the year,
which is partly due to corporate activity.

 

Euro rises against the dollar on expectations of U.S. interest rate cuts

Will Turkey’s Central Bank Continue to Raise Interest Rates?

Will Turkey’s Central Bank Continue to Raise Interest Rates?

Opinions differ on whether interest rates in Turkey have peaked.
Goldman Sachs expects that the latest increase in Turkish interest rates
will be the last in the current tightening cycle,
while other banks expect another rate hike in January.

 

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Goldman Sachs’s Forecast

Other Banks’ Forecasts

Conclusion

 

 

 

 

 

Goldman Sachs’s Forecast

In a report, analysts Clemens Graf and Basak Edizgil say that interest rates will not rise above the current level of 42.5% unless there is a surprise in the inflation rate. They expect that lending costs will start to decline after the third quarter of next year, reaching 25% by the end of the year.

Goldman Sachs’s forecast is based on several factors, including:

  • The decline in Turkey’s inflation rate from a peak of 85% in October last year to 61% in November of this year.
  • The Turkish Central Bank’s forecast that inflation will fall to 36% by the end of this year.
  • External pressure on the Turkish Central Bank to cut rates in order to support exports and attract foreign investment.

 

 

 

 

 

Other Banks’ Forecasts

Other banks, such as Morgan Stanley, Deutsche Bank, and Bank of America Securities, expect another rate hike in January.

This forecast is based on several factors, including:

  • The continued rise in Turkey’s inflation rate, with analysts predicting that it will accelerate to 70% in the coming months.
  • The Turkish Central Bank’s desire to fully control inflation before starting to cut rates.

 

 

Conclusion

It is still unclear whether interest rates in Turkey have peaked. This will depend on several factors, including the evolution of Turkey’s inflation rate and external pressure on the Turkish Central Bank.

In the end, the Turkish Central Bank will have to make a decision on interest rates based on its assessment of the economic situation in the country.

 

 

 

Will Turkey’s Central Bank Continue to Raise Interest Rates?

Euro to rebound strongly in 2024

Euro to rebound strongly in 2024, driven by dollar weakness and return of European investment

Analysts at RBC Global Asset Management expect the euro to rebound strongly in 2024,
with a potential gain of up to 10%.
This outlook is based on two main factors: the weakening of the US dollar and
the return of European investment to the home market.

 

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Weakening of the US dollar

Return of European investment to the home market

Conclusion

 

 

 

 

 

Weakening of the US dollar

The US dollar has been on a downward trend since the end of October 2022,
and analysts expect this trend to continue in 2024.
This is due to a number of factors, including:

  • Rising inflation rates in the United States, which are pushing the Federal Reserve to raise interest rates.
  • Weakening economic growth in the United States, which is reducing the dollar’s appeal as an investment asset.
  • Improving economic growth in Europe, which is making the euro more attractive to investors.

 

 

 

 

 

 

Return of European investment to the home market

Analysts expect European investment that has been made outside the region to return to the home market in 2024. Around €4 trillion of European investment has been made outside the euro area since 2014, when the European Central Bank imposed negative interest rates. This is due to a number of factors, including:

  • Rising interest rates in Europe, which are making European investment abroad less attractive.
  • Improving economic growth in Europe, which is creating more attractive investment opportunities.

 

 

Conclusion:

Analysts expect the euro to reach $1.21 against the dollar by the end of 2024. However, they warn that the outlook could change if economic growth in Europe or the rest of the world weakens.

 

 

Euro to rebound strongly in 2024

China Sends Strong Signals on Yuan Stability

China Sends Strong Signals on Yuan Stability

Beijing Sets Daily Reference Rate at 7.1140 Dollars Per Yuan

 

 

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Expectations

 

 

 

 

The details

China sent strong signals on the stability of the yuan on Wednesday,
after Moody’s Investors Service downgraded its outlook on the country’s credit rating to negative.

 

The People’s Bank of China set the daily reference rate for the managed currency at 7.1140 dollars per yuan,
which is more than 0.3% below the average estimate in a Bloomberg survey.

The decline is the largest in the daily reference rate since more than two weeks,
and suggests that Beijing is willing to use its monetary tools to keep the yuan stable.

“Setting the daily reference rate below expectations is a clear signal from the Chinese government that it is committed to the stability of the yuan,
” said Christopher Wong, a strategist at Oversea Chinese Banking Corp.

Wong added that “the market will not rule out intervention from policymakers if there are significant fluctuations in the yuan.”

The decision by China to set the daily reference rate below expectations came a day after Moody’s downgraded its outlook on China’s credit rating to negative. Moody’s cited concerns about rising Chinese government debt,
the slowdown in the property market, and the country’s increased use of fiscal stimulus.

 

 

 

 

 

Expectations

Some analysts believe that Moody’s downgrade could lead to increased pressure on the yuan.
However, the decision by China to set the daily reference rate below expectations suggests
that the Chinese government is willing to use its monetary tools to keep the yuan stable.

This move is likely to send a strong signal to markets that China is committed to the stability of the yuan,
and that it will not allow Moody’s downgrade to derail its efforts.

 

 

 

China Sends Strong Signals on Yuan Stability

 

US dollar steadies amid expectations of rate cuts

US dollar steadies amid expectations of rate cuts in 2024

The US dollar held steady on Monday, but volatility is likely to increase in the coming sessions,
with several high-impact events on the calendar.

 

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The focus will be on US personal consumption expenditures data, ISM manufacturing results, and a public appearance by Fed Chair Powell later in the week.

According to expectations, personal spending for October is expected to rise by 0.2% on a monthly basis, a significant slowdown from September’s 0.7% jump. Meanwhile, the core personal consumption expenditures index, the Fed’s preferred measure of inflation, is expected to rise by 0.2% on a monthly basis, bringing the annual rate to 3.5% from 3.7% previously.

If the data comes in line with expectations, it will boost traders’ expectations of rate cuts from the Federal Reserve in 2024.

 

 

 

 

 

 

Conclusion

The US dollar will continue to rise if economic data suggests that inflation is heading lower and economic activity is slowing. However, if the data comes in above expectations, it could lead to a decline in the US dollar.

 

US dollar steadies amid expectations of rate cuts in 2024

The Dollar Fluctuates Under Financial Uncertainty

The Dollar Fluctuates Under Financial Uncertainty

The financial markets are witnessing noticeable fluctuations in the performance of the dollar as it grapples with the pressures arising from the lack of clarity regarding the path of US interest rates.
This fluctuation accelerates amid current economic and financial events, creating a state of instability in the market.

 

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Japanese Yen

 

 

 

 

 

 

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With the closure of the US markets due to Thanksgiving, Friday is considered a short trading session,
leading to reduced trading volume and increased volatility.
The dollar index, measuring the performance of the US currency against six major currencies,
has decreased, remaining close to its lowest level in two and a half months.

 

Attention is now turning to developments within the US Federal Reserve,
where the decline in the index over the month indicates growing expectations that
the period of interest rate hikes may be coming to an end,
possibly marking the beginning of a reduction phase next year.

 

On the other hand, the euro has gained additional ground, reaching $1.0904.
The euro receives support from positive data suggesting that the recession in Germany may be less than expected,
partially offsetting concerns about business performance in France.

 

 

 

 

 

Japanese Yen

In the same context, Japan has experienced a slight improvement in the core consumer price index in October,
reinforcing expectations of a reduction in monetary stimulus by the Bank of Japan.
Economic experts believe that the Bank of Japan may abandon its overly accommodative stance next year,
leading to a slight increase in the Japanese yen.

 

In another context, the British pound recorded a slight increase to $1.2539,
while the Australian dollar and New Zealand dollar saw slight gains,
continuing the prevailing uncertainty in global markets.

 

 

 

The Dollar Fluctuates Under Financial Uncertainty

 

Turkish Lira Stability Attracts Interest Traders Amid Economic Shifts

Turkish Lira Stability Attracts Interest Traders Amid Economic Shifts

Currently, attention is turning towards the Turkish Lira, as its unusual stability appears to be a strong attraction for interest traders seeking to profit from global market fluctuations.

 

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Conclusion

 

 

 

 

 

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Over the past three months, the Turkish Lira experienced a record decline in its value. However, recently, signs of stability have emerged, with daily losses significantly decreasing, and the expected monthly currency volatility contracting. Economic experts believe that this stability, coinciding with the rise in Turkish bond yields, creates attractive opportunities for interest traders.

 

According to Emre Akcakmak, Senior Advisor at “East Capital” in Dubai, he states,
“Some investors are now reconsidering their old plans,”
pointing out that the Lira exhibits a behavior resembling a floating exchange rate system,
allowing gradual changes in the currency value.

 

This improvement in currency volatility provides investors with opportunities to profit from short-term Turkish bonds,
while the Lira’s value rises in real terms.
In this context, Turkish Finance Minister, Mehmet Simsek,
has indicated the government’s commitment to ensuring the long-term appreciation of the currency.

 

Despite Barclays Bank expecting the continued decline of the Lira, experts at Goldman Sachs believe it may experience an upward trend in the coming year, accompanied by an improvement in real interest rates.

 

 

 

 

 

 

 

Conclusion

Turkey has overcome recent financial challenges by adopting new economic policies aimed at attracting investors, supported by an economic team emphasizing the market’s importance and striving to regain confidence.
Despite these improvements, obstacles persist, such as the decline in foreign exchange reserves and the high inflation rate, which may raise concerns among investors.

 

With these shifts in Turkey’s economy, it seems that the Turkish Lira is once again attracting the interest of interest traders,
who may benefit from the new opportunities available in this evolving economic context.

 

 

Turkish Lira Stability Attracts Interest Traders Amid Economic Shifts

Goldman Sachs Outlook U.S. Economic Strength and the Dollar’s Path

Goldman Sachs Outlook U.S. Economic Strength and the Dollar’s Path

In a recently published article by Goldman Sachs, economic strategists foresee an improvement in the value of the U.S. dollar in the coming year, despite the current bleak outlook.
This analysis comes against the backdrop of the current economic conditions, where the dollar is facing a decline in its value. However, the Goldman Sachs team believes that the robust economic power of the United States and high returns may serve as catalysts for enhancing the dollar’s valuation.

 

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Despite the dollar’s 1.6% decline this year, its ranking remains high, and Goldman Sachs analysts consider that factors contributing to the strength of the U.S. economy will stabilise its value soon. In their annual report, they pointed to expectations of a global economic balance returning in the coming year, potentially positively impacting the dollar.

 

While some anticipate a sharp decline in the dollar’s value, as seen after the Plaza Accord in the 1980s, Goldman Sachs experts believe that any retreat this time will be less profound. If other economies fail to keep pace with the restrictions imposed by the United States, the dollar may continue its upward trend.

 

On the other hand, forecasts predict a challenging fate for the Euro. Goldman Sachs experts anticipate its value rising to $1.10 next year, supported by economic growth recovery in the second half of 2024. Despite this expected improvement, there remain risks of growth weakness and additional shocks in energy prices that could impact the Euro.

 

As for the Japanese Yen, market sentiment is disappointed with Japan’s shift toward monetary tightening policies. Goldman Sachs expects the exchange rate of the Yen to decline to 155 Yen per dollar in the next six months, emphasizing that the Yen may struggle to confront significant economic challenges.

 

Concerning the British Pound, increasing pressure is evident in the short term due to its sensitivity to changes in real interest rates. In their predictions, experts anticipate that the Pound may continue on a downward trajectory in the coming months, especially with the Bank of England hesitating to raise interest rates.

 

 

Goldman Sachs Outlook U.S. Economic Strength and the Dollar’s Path