Alex Kuptsikevich, Senior Financial Analyst at FxPro, a few questions regarding US inflation, UK 100, cryptocurrency market and more. Here's what he replied.
Global stocks and commodities rise, even cryptocurrencies note an increase. Are you of the opinion as Chinese economy finally opened and US labour market deliver markets with promising numbers there's only ongoing Russian-Ukrainian war preventing markets from real growth?
So far, the rise in asset prices has been more of a sigh of relief when things do not develop according to the worst-case scenario. Nevertheless, it is worth paying attention to the disastrous drop from 3% to 1.7% in global GDP growth forecasts for 2023 from the World Bank. This low growth promises a subdued global demand comparable to the worldwide recession times of 2020 and 2009. In contrast to the years, major world central banks are increasing interest rates instead of decreasing them. The full effect of the policy tightening has yet to become evident but will manifest itself by the middle of the year. Even if stopped immediately, the war between Ukraine and Russia will not fix the logistical problems as it is unlikely to change attitudes towards Russian energy.
It seems that inflation in Eurozone is cooling down, do you expect the same from the US economy this week?
The US economy is one step ahead, staying within Europe in the business cycle. Inflation data from the USA could therefore be a benchmark for the eurozone, but hardly the other way around. Commodity prices are falling, which is keeping inflationary pressures in check. However, it is now worthwhile to start shifting the focus to services inflation as rising wages can creep into this area and become a real problem for central bankers around the world. Service price developments will determine how long the Fed will raise interest rates and keep them high. So far, the forecasts of the FOMC members are alarming. At the same time, market participants have shrugged off such comments, continuing to believe in an imminent policy reversal to easing due to weaker commodity prices.
Read next: 2023 Predictions: Central banks were buying gold at the end of the year at the highest rate since 1955 | FXMAG.COM
Bullish sentiment spreads among cryptocurrency market - even altcoins gain significantly - what's the most probable driver of these increases?
Currently, the main driver of growth is the depletion of sellers. There isn't anyone to sell cryptocurrencies yet, after having been down for more than a year. However, such a reason is rarely a basis for sustained growth. That would require a new investment idea, which is hard to find with tight financial conditions and increased demands on project returns. The good news right now is when a project stays afloat.
UK 100 doesn't seem to share optimism of US equities, could decent GDP print this Friday help the index and UK economy as a whole?
The weaker pound has contributed to the UK100 trading at its highest since 2018 this week. It is also noteworthy that the leading UK equity index and the pound have been moving upwards in sync since October. The UK equity market is helped by the previous weakening of the pound, which has somewhat boosted the competitiveness of local goods, as well as a rebound in raw material and energy prices, which allows producer and seller costs to fall. Separately, continental European and British equities have enjoyed a clear influx since the start of the year. Investors appear to have been pleased with the resilience of the region's economies in light of the energy crisis and are also hoping for a recovery in Chinese activity, rushing to turn the page on a tough 2022.
