Federal Reserve, RNBZ In Focus, Global Growth Concerns Weigh

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Complex macroeconomic conditions prevail before a speech by Federal Reserve Chairman Jerome Powell and the Reserve Bank of New Zealand’s (RBNZ) interest rate decision. New Zealand’s central bank is expected to raise its key interest rate guidance from 1.5 per cent to 2 per cent in Wednesday’s decision. The current inflation rate in New Zealand is close to 7 per cent.

In April, the World Bank cut its 2022 growth forecast for the East Asia and Pacific region to 5 percent from 5.4 percent. Global growth concerns continue to weigh on market sentiment as Chinese fiscal policy makers release an additional 140 billion yuan in tax cuts in economic stimulus to offset the losses of the latest COVID-19 lockouts. Airbnb has said it will stop renting in China as tourism falters amid the blockade. In response to China’s problems with COVID-19, stock markets in Asia opened the week in a bearish mood.

Global growth challenged

Meanwhile, in another warning for global growth prospects, several large companies have withdrawn from Russia. McDonalds and Starbucks will be the world’s sixth largest economy in the midst of ongoing conflict in Ukraine.

The S&P Global Composite PMI benchmark for the Eurozone is set today and is expected to have fallen from 55.8 to 55.3. Anything unexpected can move the EURUSD and other EUR currency crosses.

Monetary policy makers grew steadily stronger in Q2 as inflationary pressures drag on retail sales and press consumer spending. Traders have assessed another rate hike in the world’s largest economy and Jerome Powell’s speech later today should shed some light on the magnitude of a monetary tightening coming in June.

The optimistic view is that by September, inflation will be under control in the United States after two additional rates of between 0.5 and 0.75 percent each. Rising risks to this scenario include the effects of China’s shutdowns on supply chains to U.S. markets and the ongoing conflict in Ukraine, which keeps spot oil prices high and adds to inflationary pressures.

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