US inflation is falling sharply. China’s trade balance points to a slowing economy

The US Treasury yields also declined following a weak inflation reading, as the data combined with signs of a cooling labor market spurred bets that the Fed is likely to soften its hawkish stance in the coming months. The probability of a rate hike at the July West meeting is 92%, while the probability of a hike at the September and November meetings is 14% and 26%, respectively.

On Wednesday, the Bank of Canada raised the overnight interest rate by 25 basis points to 5.00% and also extended its projected timetable for lowering Canada’s inflation rate to its 2% target by mid-2025. The Bank of Canada left little guidance on the way forward. At the press conference, the Bank of Canada Governor indicated that the improvement in overall momentum was largely due to lower energy prices rather than underlying pressures, hinting that restrictive policies will be in place for longer.

UK GDP showed no growth for the second quarter of 2023. On an annualized basis, the economy contracted by 0.4%. Manufacturing fell by 0.6% in May 2023 after falling by 0.2% in April 2023. The construction sector fell by 0.2% in May 2023 after falling by 0.9% in April 2023. Services output showed no growth in May 2023 after rising by 0.3% in April 2023. Overall, economic conditions continue to deteriorate, which could pose a challenge for the Bank of England to further fight inflation.

Gold rose sharply yesterday amid a falling dollar and government bond yields. There are good growth prospects for gold as the US Fed is at the end of its tightening cycle. At the same time, silver shows better performance among precious metals.

Asian markets mostly traded higher on Wednesday. Japan’s Nikkei 225 (JP225) decreased by 1.04% yesterday, China’s FTSE China A50 (CHA50) was up by 0.15%, Hong Kong’s Hang Seng (HK50) added 1.14%, and Australia’s S&P/ASX 200 (AU200) closed positive 0.81% for the day.

In Japan, conditions for rising inflation are emerging, which puts pressure on the Bank of Japan to abandon its multi-year soft monetary policy. Markets are already betting on the Bank of Japan’s policy adjustment, which is reflected in the strengthening of the Japanese yen.

Last month, China’s exports contracted at the fastest pace since the COVID-19 pandemic began. Exports contracted by 12.4% year-on-year in June after falling by 7.5% in May. Imports fell by 6.8%, which was stronger than the 4.0% decline expected and the 4.5% drop in the previous month. The data indicate that China’s economic recovery has slowed after a strong first quarter, and analysts are now downgrading their forecasts for the economy for the rest of the year as factory output slows amid continued weak global demand.