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Is the EU economy growing? Quarterly GDP growth estimate for the eurozone worsened to 0.6%

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Eurozone gdp growth 2022

Is the EU economy growing? Quarterly estimate of eurozone GDP growth worsened to 0.6%Eurozone GDP growth quarterly estimate worsened to 0.6%In the 2nd quarter, the economy of 19 eurozone countries increased by 0.6% compared with the previous quarter, according to the revised data of the EU Statutory Administration.

Thus, the indicator was worsened from the preliminary estimate of 0.7%.

Eurozone gdp growth 2022

Analysts on average did not expect a revision from the previously announced level, according to Trading Economics. On an annualized basis, eurozone GDP grew by 3.9% in April-June, rather than 4% as previously reported. Experts also did not forecast a revision of this indicator.

Among the largest economies of the region, the GDP of Spain increased by 1.1% in quarterly terms. Italy – by 1%. France – by 0.5%. Meanwhile, the German economy remained unchanged from the first quarter, while the GDP of Portugal, Lithuania and Latvia decreased by 0.2%, 0.4% and 1.4% respectively.

In Q1 this year, eurozone GDP growth was 0.5% quarter-on-quarter and 5.4% year-on-year. This is the second of three estimates of quarterly economic growth in the currency bloc. The final data will be published on September 7. The quarterly GDP growth estimate for the euro area has been downgraded to 0.6%. 

Earlier we talked about crude oil price forecast for 2022.

Forex

Explainer-What would Japanese intervention to boost a weak yen look like?

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By Leika Kihara

TOKYO (Reuters) – Japanese authorities are facing renewed pressure to combat a sustained depreciation in the yen, as traders drive down the currency on expectations that any further interest rate hikes by the central bank will be slow in forthcoming.

The yen rallied after Tokyo issued on Wednesday its strongest warning to date on the chance of imminent intervention, coming off a 34-year low of 151.97 to the dollar hit earlier in the day.

Below are details on how yen-buying intervention works:

LAST CONFIRMED YEN-BUYING INTERVENTION?

Japan bought yen in September 2022, its first foray in the market to boost its currency since 1998, after a Bank of Japan (BOJ) decision to maintain its ultra-loose monetary policy drove the yen as low as 145 per dollar. It intervened again in October after the yen plunged to a 32-year low of 151.94.

WHY STEP IN?

Yen-buying intervention is rare. Far more often the Ministry of Finance has sold yen to prevent its rise from hurting the export-reliant economy by making Japanese goods less competitive overseas.

But yen weakness is now seen as problematic, with Japanese firms having shifted production overseas and the economy heavily reliant on imports for goods ranging from fuel and raw materials to machinery parts.

WHAT HAPPENS FIRST?

When Japanese authorities escalate their verbal warnings to say they “stand ready to act decisively” against speculative moves, that is a sign intervention may be imminent.

Rate checking by the BOJ – when central bank officials call dealers and ask for buying or selling rates for the yen – is seen by traders as a possible precursor to intervention.

WHAT HAPPENED SO FAR?

Finance Minister Shunichi Suzuki told reporters on Wednesday that authorities could take “decisive steps” against yen weakness – language he hasn’t used since the 2022 intervention.

Hours later, Japanese authorities held an emergency meeting to discuss the weak yen. The meeting is usually held as a symbolic gesture to markets that authorities are concerned about rapid currency moves.

After the meeting, Japan’s top currency diplomat Masato Kanda said recent yen moves were too rapid and out of line with fundamentals, suggesting Tokyo saw enough reason to intervene to arrest further declines in the currency.

LINE IN THE SAND?

Authorities say they look at the speed of yen falls, rather than levels, and whether the moves are driven by speculators, to determine whether to step into the currency market.

With the dollar having breached levels that triggered intervention in 2022, market players see a sharp move above 152 yen as the next threshold, then 155 yen.

WHAT’S THE TRIGGER?

The decision is highly political. When public anger over the weak yen and a subsequent rise in the cost of living is high, that puts pressure on the administration to respond. This was the case when Tokyo intervened in 2022.

If the yen’s slide accelerates and draws the ire of media and public, the chance of intervention would rise again.

The decision would not be easy. Intervention is costly and could easily fail, given that even a large burst of yen buying would pale next to the $7.5 trillion that change hands daily in the foreign exchange market.

HOW WOULD IT WORK?

When Japan intervenes to stem yen rises, the Ministry of Finance issues short-term bills, raising yen it then sells to weaken the Japanese currency.

To support the yen, however, the authorities must tap Japan’s foreign reserves for dollars to sell for yen.

In either case, the finance minister issues the order to intervene and the BOJ executes the order as the ministry’s agent.

CHALLENGES?

Yen-buying intervention is more difficult than yen-selling.

While Japan holds nearly $1.3 trillion in foreign reserves, these could be substantially eroded if Tokyo intervened heavily repeatedly, leaving authorities constrained over how long they can defend the yen.

Japanese authorities also consider it important to seek the support of Group of Seven partners, notably the United States if the intervention involves the dollar.

© Reuters. A worker holds samples of new Japanese yen banknotes at a factory of the National Printing Bureau producing Bank of Japan notes at a media event about the new notes scheduled to be introduced in 2024, in Tokyo, Japan, November 21, 2022. REUTERS/Kim Kyung-Hoon/File Photo

Washington gave tacit approval when Japan intervened in 2022, reflecting recent close bilateral relations. There is uncertainty on whether the same will happen when Japan next considers intervention.

A looming U.S. presidential election may discourage Japanese authorities from stepping in, given the risk of drawing unwanted attention and criticism from Washington as market meddling.

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Japan repeats verbal warning to yen bears, BOJ keeps dovish tone

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By Leika Kihara and Kentaro Sugiyama

TOKYO (Reuters) -Japanese Prime Minister Fumio Kishida said on Thursday the government will not rule out any options in addressing excessive moves in the currency market, stressing Tokyo’s resolve to step into the market if it sees the yen’s fall as overdone.

“It’s important for currency rates to move stably reflecting economic fundamentals,” Kishida told a news conference, when asked about the yen’s recent slide to three-decade lows.

“We will monitor currency moves with a high sense of urgency, and respond appropriately without ruling out any options to deal with excessive currency moves,” he said.

His remarks echoed those by Japan’s top currency diplomat Masato Kanda on Wednesday, when the yen hit a 34-year low against the dollar on expectations the Bank of Japan will go slow in raising interest rates, thereby maintaining the huge gap between Japanese and U.S. rates.

On Wednesday the dollar briefly hit 151.975 yen, exceeding the 151.94 level at which Japanese authorities stepped in during October 2022 to buy the currency.

On Thursday it lost some ground to stand at 151.370 yen.

The yen’s sharp declines come despite the BOJ’s decision last week to end eight years of negative interest rates, as traders focused more on its dovish message suggesting that another rate hike will be some time off.

Upon ending negative rates, many BOJ policymakers saw the need to go slow in phasing out ultra-loose monetary policy, a summary of opinions at last week’s meeting showed on Thursday.

“With the yen weakening to a fresh 34-year low against the dollar, the Ministry of Finance signalled that an intervention in the foreign exchange markets is imminent,” said Marcel Thieliant, head of Asia-Pacific at Capital Economics.

“However, the yen will certainly not get much support from Japan’s monetary policymakers as inflation is more likely to undershoot than to overshoot the Bank of Japan’s forecasts.”

Data due out on Friday is likely to show annual core inflation in Japan’s capital, which is considered a leading indicator of nationwide trends, slowed to 2.4% in March after a 2.5% gain in February, according to a Reuters poll.

© Reuters. A worker holds a sample of a new Japanese yen banknote at a factory of the National Printing Bureau producing Bank of Japan notes at a media event about the new notes scheduled to be introduced in 2024, in Tokyo, Japan, November 21, 2022. REUTERS/Kim Kyung-Hoon/File Photo

Japanese policymakers have historically favoured a weak yen as it helps boost profits at the country’s big manufacturers.

But the yen’s sharp declines have recently added to headaches for Tokyo by inflating the cost of raw material imports, hurting consumption and retail profits.

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Dollar soars after hawkish Waller comments; sterling, euro weaken

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Investing.com – The U.S. dollar rose in European trade Thursday following hawkish comments from a Federal Reserve official, while weak economic data weighed on the euro and sterling.

At 05:30 ET (09:30 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.3% higher at 104.320, near the highest level since mid-February.

Dollar boosted by Waller’s comments

The greenback has been in demand after Fed Governor Christopher Waller said, in a speech at an Economic Club of New York gathering late Wednesday, that recent disappointing inflation data affirms the case for the U.S. central bank holding off on cutting its rates in the short-term.

“There is no rush to cut the policy rate” right now, Waller said, as recent data “tells me that it is prudent to hold this rate at its current restrictive stance perhaps for longer than previously thought to help keep inflation on a sustainable trajectory toward 2%.”

“The speech will have been a disappointment to dollar bears who might have been hoping for some reassuring confidence on the disinflation process and some further discussion of the seasonal problems with the firm January inflation data,” analysts at ING, in a note.

There is more economic data to digest Thursday, including weekly , fourth-quarter data and .

The main focus, however, will be on Friday’s release of the Fed’s favorite inflation gauge, the , when the market is shut for Good Friday.

Sterling, euro slump

In Europe, fell 0.3% to 1.0789, near its lowest in five weeks, after data released earlier Thursday showed that unexpectedly fell 1.9% on the month in February, illustrating the difficulties Europe’s largest economy was suffering in the first quarter.

European Central Bank officials have become very dovish of late, with board member Piero Cipollone the latest to hint at interest rate cuts as soon as June.

“Wage growth appears on track to gradually moderate in the medium term towards levels that are consistent with our inflation target and productivity growth, in line with the projections,” Cipollone told an event in Brussels on Wednesday.

“As our confidence in the timely convergence of inflation to our target grows, it also strengthens the case for adjusting our policy rates,” Cipollone said.

fell 0.3% to 1.2603, after data confirmed that the U.K. economy went into a shallow recession last year.

The country’s shrank by 0.1% in the third quarter and by 0.3% in the fourth, unchanged from preliminary estimates, meaning two consecutive quarters of negative growth.

Britain’s economy has shown signs of starting 2024 on a stronger footing, with monthly GDP growth of 0.2% in January, but with inflation slowing the Bank of England is moving towards the point where it can start cutting rates. 

Yen on intervention watch

traded 0.1% higher at 151.41, after surging as high as 151.97 on Wednesday – its strongest level since mid-1990.

Japanese authorities held a meeting on Wednesday on the currency’s weakness and ramped up their verbal warnings, meaning that speculation is running rife that intervention is close.

Japan intervened in the currency market three times in 2022, selling the dollar to buy yen, first in September and again in October as the yen slid towards a 32-year low of 152 to the dollar.

rose 0.1% to 7.2295, with the pair remaining well above the 7.2 level even as the People’s Bank of China set a substantially stronger-than-expected midpoint to stem more losses in the yuan.

 

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