Global Central Banks To Remain Data Dependent As They Battle Elevated Inflation
The global central banks are expected to remain data-dependent as they continue to battle elevated inflation, said the Bank of Baroda (BoB) in a report on Monday.
Recently released data including the PCE (4.6 per cent versus 4.7 per cent) report concluded that inflation has cooled off in May more than expected pointing to the desired results of the Fed’s rate hike cycle.
According to the CME FedWatch tool, markets are now anticipating an 84 per cent likelihood of a 25 bps rate hike by the Fed in the upcoming July 2023 meeting.
The bank in the report stated that global indices ended in the green, while Dollar softened as Fed is expected to become less aggressive on rate hikes. Crude prices settled higher despite some concerns over dampening demand.
It added, "Barring Nikkei and Hang Seng, other global indices closed higher. Strong economic data from the US (GDP) along with US banks passing Fed’s annual stress test, lifted investor sentiments."
Europe’s stock indices edged up after Eurozone’s inflation came in lower than anticipated. Sensex too surged, led by gains in IT and auto stocks. It is trading higher today, in line with other Asian stocks, it added.
Apart from the Indian rupee (flat) and CNY (lower), other major currencies ended higher against the dollar. DXY fell by 0.4 per cent as moderation in the PCE index has renewed hopes of a less aggressive monetary policy stance of the Fed.
He mentioned, "GBP gained the most supported by a rise in yield. INR ended flat. However, it is trading higher today, in line with other Asian currencies."
It also stated that global yields closed mixed. "Weaker than expected core PCE print for May’23 has reignited hopes of the Fed ending the rate hike cycle after its July 2023 policy meeting. Yields in the UK inched up as market participants are pricing in a 70 per cent chance that BoE’s policy rate will push up to 6.25 per cent by the year's end," it stated.
