Will US GDP data confirm a recovery in activity?

U.S. economic growth has slowed sharply as the Delta variant of the coronavirus slashed consumer spending and supply chain bottlenecks hit businesses, but activity is already showing signs of recovery.

Economists predict on Thursday that US Department of Commerce data will show GDP growth of 3.2% on an annualized basis in the July-September quarter, compared to a 6.7% expansion in the second quarter.

Consumer confidence plummeted and Americans spent less during the Delta resurgence. They have also become more wary of the higher prices of everything from groceries to gasoline and real estate prices, contributing to lower spending. “I have consumer spending pegged at near zero growth in the third quarter,” said James Knightley, chief international economist at ING.

Still, economic data suggests that momentum started to pick up at the end of last month, following signs of receding from the Delta Wave. Retail sales beat expectations in September, wages are rising and more Americans could return to work “as the holiday season approaches, which is an expensive time of year,” Knightley said .

“We expect the health situation to improve slowly, strong household finances, inventory rebuilding and additional fiscal stimulus will support strong growth momentum in 2022,” said Gregory Daco, chief US economist at Oxford Economics . Mamta badkar

How far can the Turkish lira go?

Turkey’s central bank surprised markets last week by cutting its key rate by 2 percentage points. The pound responded by plunging into a succession of new lows against the dollar, hitting 9.50 TL to the dollar on Thursday and expanding beyond 9.60 TL on Friday. How far can he go?

The backdrop is not right, other global central banks are raising or considering raising rates and the Federal Reserve is expected to start withdrawing monetary support soon. Turkey has a spike in external debt payments at the end of this year which will also put pressure on the lira.

Barclays forecast TL9.7 by the end of 2021 on Thursday. But that year-end forecast was about to be broken on Friday. Commerzbank, which forecast TL10 by the end of 2021 even before last week’s rate cut, said a currency “collapse” was underway “with no end in sight”. President Recep Tayyip Erdogan’s decision on Saturday to declare 10 Western ambassadors persona non grata, risking a new crisis in relations with the West, was “an additional inconvenience” to read it, said Istanbul-based analyst Enver Erkan.

A crumb of comfort to read it is that an international capital flight from Turkey is limiting the potential for further foreign outflows. Instead, all eyes are on Turkish investors and savers – and their appetite for buying more dollars.

Goldman Sachs says further dollarization and pound weakness are likely. He argues that the central bank will eventually be forced to either suspend its cut cycle or announce an emergency rate hike, as it has done in the past.

But Societe Generale’s Phoenix Kalen wonders if President Recep Tayyip Erdogan – who unconventionally believes that high interest rates cause inflation – might wish to complete his latest experiment. “Maybe this time around we may not see these emergency rate hikes materialize,” she said. “This means that we are heading towards hyperinflation and a currency crisis.” Laura Pitel

How will the European Central Bank react to expectations of rate hikes?

Markets have started to factor in the possibility of higher interest rates in the eurozone as investors around the world bet on a response to higher-than-expected inflation.

However, unlike the Bank of England – which has actively promoted the idea that rate hikes are coming – the European Central Bank has done little to suggest that expectations of a 0.1 percentage point hike d ‘by the end of next year are warranted, with chief economist Philip Lane saying last week that the price did not match ECB guidelines.

Against this backdrop, some analysts expect ECB boss Christine Lagarde to push back the markets during Thursday’s policy meeting.

“The ECB is not the BoE, that will likely be the main message of the October 28 meeting,” Citi rate strategist Jamie Searle said, referring to recent hawkish comments from Bank of England policymakers. . “The ECB is likely to push back, probably more strongly than so far, the idea of ​​anticipated rate hikes and also any notion that the sequence between asset purchases and rate hikes may change.”

Eurozone rate hikes will not be on the menu until the ECB’s bond buying programs are completed, the central bank previously said. Lagarde is not expected to provide details of asset purchase plans beyond the end of the emergency pandemic quantitative easing program, which is expected to end in March. Instead, the ECB president “will likely indicate that ECB staff are considering various QE transition options for the December meeting,” Barclays European rate research chief Cagdas Aksu said. Tommy stubbington


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