This week is decision time for a host of central banks that together represent 40% of the global economy with interest rate announcements from the central banks of Japan and Australia (19 March); USA (20 March), the UK and Switzerland (21 March).
Will the Bank of Japan decide to raise interest rates for the first time since 2007, ending the world’s last negative interest rate?
Will the Reserve Bank of Australia, US Federal Reserve and the Bank of England decide to keep interest rates unchanged again amid mixed economic data?
In Switzerland, amid muted speculation, will the SNB (Swiss National Bank) decide to cut interest rates after a lower-than-expected inflation rate. The Swiss inflation rate fell in February to its lowest level in nearly two and half years.
Currency Exchange Rates Update
The Pound to Euro exchange rate remains rangebound, up 1.44% since the start of the year.
A strong start to the month for the Pound against the Dollar fizzled out last week and the Pound to US Dollar exchange rate is back to where it was at the start of 2024.
Much better news on the Pound to Australian Dollar exchange rate which remains over 3.8% up since the turn of the year.
What’s In The News?
In The UK…
Good News
The latest UK labour market report shows indications that recent ‘hot’ labour market is showing signs of cooling but remains hot by historical standards. The unemployment rate nudged up to 3.9% in the three months to January while the number of people in employment reportedly fell by 21,000 in the same period, pointing to some reversal of the rise in the last quarter of 2023.
The number of unfilled vacancies fell by 30,000 in the three months to January, consistent with other measures of labour demand, such as the KPMG/REC survey whilst the Lloyds Bank Business Barometer’s indicator of hiring intentions in the year ahead continues to strengthen and points to some upside risks to future labour demand.
The interaction between labour demand and supply has implications for pay trends which in turns is a major factor behind how quickly and soon the BoE will start to lower UK interest rates. The moderation in headline pay growth to 6.1% in January was seen as encouraging news for the BoE but with pay growth likely to regain some momentum once the rise in the National Living Wage takes effect next month and the most recent private sector pay settlements feed through, the BoE is more than likely to continue to take a cautious approach to lowering interest rates this year.
Meanwhile, the RICS residential market survey released overnight provided further evidence of improving sentiment in the UK housing market. The survey revealed a positive net balance of 6% for new buyer enquiries, unchanged from last month and the joint highest for 2 years.
Not So Good News
UK retail sales growth slowed in February. Bad weather alongside high borrowing costs and inflation were blamed.
In The USA…
The US national debt is rising by $1 trillion (that is a one followed by twelve zeros) about every 100 days! The total debt now stands at nearly $34.4 trillion.
US inflation unexpectedly rose to 3.2% in February whilst the US economy added 275,000 new jobs in the same month. However, January’s strong jobs data was sharply downgraded, and the unemployment rate rose from 3.7% to 3.9%.
The US dollar has appreciated against just 6% of 50 global currencies so far in March in contrast to 43% in February and 73% in January of currencies that it appreciated against.
The US economy has outperformed its peers, but cracks are emerging in the US economy as leading economic indicators start to turn negative. While the US economy has avoided a recession and unemployment remains low, not everyone is having an easy time of it with some Americans feeling the pressure of rising borrowing costs. Delinquency rates on their credit card debt and auto loans are now at the highest in more than a decade.
The NFIB survey of small businesses, a leading indicator for wage growth and therefore inflation has fallen to its lowest level since the beginning of 2022.
Donald Trump and Joe Biden are almost certain to make it a general-election rematch in November. As expected, both Biden and Trump prevailed in nearly every ‘Super Tuesday’ nominating contest but 61% of those who supported Biden in 2020 now say he is “just too old” to lead the country effectively, according to a new poll by The New York Times and Siena College.
In The EU…
At their meeting last week, the ECB (European Central Bank) held EU interest rates unchanged but cut its inflation and growth forecasts.
Spanish data showed unemployment fell by 7,452 people in February and stood at 2.76 million, the lowest figure since 2008. Spain is the EU’s fourth biggest economy.
Germany has started felling 120,000 trees from a thousand-year-old ‘Fairy Tale’ forest in Reinhardswald to make way for wind turbines. Who is opposing this massive destruction of the ancient forest teeming with wildlife with trees over 200 years old? Not the Green party, now in power at national and local level.
Others
Last year, China’s GDP growth officially came in at 5.2% but outside China estimates put it at 1-2%. At last week’s National People’s Congress, the 2024 economic target was announced with growth for 2024 set at 5%.
Chinese consumer spending continues to drop at the sharpest rate for 15 years and the well reported fall out in the real estate market continues apace.
China is facing the prospect of tighter US chip export controls, higher limits on Chinese access to US personal data and official probes of security risks in Chinese vehicles.
Australia is grappling with a deepening housing crisis yet when it comes to the most obvious solution, more property construction, Sydney dwellers are pushing back against plans by the New South Wales state government to boost density by allowing six-story apartment blocks to be built around suburban train stations.
The CEO of Hapag-Lloyd, one of the world’s largest ocean shippers has said inventories are depleted in many cases and the ocean carrier has seen a recovery after the Chinese New Year but due to the ongoing Houthi attack issues in the Red Sea and the Panama Canal drought, US companies are paying more for ocean freight, with rates on key routes up 75% to 150% in the year-to-date with implications for inflation and therefore central bank interest rate policy.
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