As we move further into 2023, savvy traders may be wishing to keep an eye on key economic indicators from around the world in order to ascertain how the global marketplace is grappling with significant economic headwinds. This week, the world’s two largest economies will release Consumer Price Index figures, while the Bank of England is set to make its latest interest rate decision.
American Inflation Figures
The long saga of the Federal Reserve’s fight against inflation in the United States has been a major factor in economic outcomes in recent times, with consumer price increases reaching levels unseen in decades.
The Federal Open Market Committee, which determines the course of monetary policy for the largest economy on the globe, concluded its latest summit last Wednesday, May 3rd, with the decision to raise interest rates yet again. With this hike of 25 basis points, or 0.25%, the federal funds rate is now at its highest level since before the Great Recession.
As such, it seems that inflation is still very much a concern for the most senior policymakers in the United States. The Bureau of Labor Statistics is expected to release the latest Consumer Price Index figures tomorrow, May 10th, at 8:30 Eastern Standard Time, potentially giving traders more key information to chew on.
Wednesday’s CPI release is expected to show a year-over-year jump of 5% in consumer prices - identical to that seen in March. While these figures are significantly lower than those registered during the height of inflation in 2022, they may indicate that the road toward the ‘ideal’ annualised inflation rate of two percent is still long. Furthermore, the monthly increase is predicted to come in at 0.4% - quadruple March’s number.
Some analysts foresee a slowdown in economic growth, with the attendant dampening effect on inflation rates in the coming months. However, key American Indices showed mixed results over the course of trading on Monday ahead of this week’s Consumer Price Index release. While the Dow Jones Industrial Average (USA 30) fell by 0.17%, the S&P 500 (USA 500) was up by a modest 0.05% and the tech-heavy Nasdaq (US-TECH 100) marked an increase of 0.18%. Whether these trends will continue this week remains to be seen.
China Dragon Returns to Slumber?
The world’s second-largest economy may be facing economic trouble as well, according to recently-released data. With China having been practically hermetically sealed off from the rest of the world during the COVID-19 pandemic, some may have expected its economic engine to come roaring back into action once strict infection control measures had been lifted. However, it seems that the post-pandemic recovery in the east is sputtering.
Today, trade data was released revealing that imports into the People’s Republic of China were down, while exports are growing at a slower pace. Furthermore, it seems that manufacturing activity in the country hit a downtrend in April, which could be increasing concerns among investors and traders alike regarding the world’s most populous nation’s near-term growth prospects. On Thursday, the latest Chinese Consumer Price Index figures are expected to be released as well, with inflation expected to have been relatively modest in April. (Source:Reuters)
As of the time of writing, it seems that investor sentiment may be turning negative in Asia. The Hang Seng Index (Hong Kong 50) is trading down by 2.1%, while the China A50 has fallen by over 0.5% since market open. Traders will have to wait and see if confidence can be restored in the days to come.
BoE to Hike Rates?
On the other edge of the Eurasian landmass, the United Kingdom’s central bank, the Bank of England, is set to release its latest interest rate decision on Thursday, May 11th. On the back of last month’s Consumer Price Index numbers, which showed British inflation reaching the double digits in March, market expectations are for a significant hike.
Many analysts foresee the Bank of England moving interest rates higher by 25 basis points to 4.5%, representing the twelfth successive hike since late 2021 and the highest interest rate level in fifteen years. A further concern for market watchers may be that the Monetary Policy Committee, the British equivalent of the FOMC, has undershot the actual inflation rate in recent forecasts. That being so, the stage could be set for even higher interest rate hikes in the coming months if sticky inflation does not respond to monetary policy tinkering quickly enough. As of the time of writing, the FTSE 100 (UK 100) in London remained static, but this could change in the coming days.
With a wealth of economic data set to be released this week, traders will have much to wrap their heads around. How these interdependent economic trends will all play out is still uncertain.