A Difficult Day Ahead For Markets

A Difficult Day Ahead For Markets

Today is an important day for market players. Firstly, they have to digest two important things which aren’t easy to swallow: the warnings from the Bank of England that their support programme will end this week no matter what. Secondly, another cut in global growth forecast by the IMF, and all this while Biden believes that the US is immune to the recession. In addition to this, we have two important events taking place, and these are the US inflation data and the Fed minutes. 

BOE’s Warnings 

Pension fund managers have been instructed by the Governor of the Bank of England, Andrew Bailey, to complete the rebalancing of their holdings by this coming Friday, which is the day the Bank of England is scheduled to conclude its emergency assistance programme for the weak bond market in the country.

The Governor issued a bold statement yesterday by saying that we have informed everyone that our support programme will end before the end of this week. The bank issued a clear warning to funds by saying that they need to finish the rebalancing of their portfolio and this act must finish this week. Bailey gave the message to the funds involved and to the businesses engaged in handling those monies: You now have three days left.” “You’ve got to get this done.” The message is bold and as clear as it can be now. 

Earlier on Tuesday, an industry organisation known as the Pensions and Lifetime Savings Association made a formal request to the Bank of England (BoE) to prolong the bond-buying programme through October 31st and potentially beyond.

However, Bailey emphasised that the programme was a component of the BoE’s financial stability operations and not a tool for monetary policy and that its duration had to be constrained to a short period of time.

After launching the programme almost two weeks ago to assist pension funds in coping with a slump in bond prices triggered by the announcement of unfunded tax cuts by the new government of Prime Minister Liz Truss, the British central bank expanded its bond-buying programme on Tuesday to include inflation-linked debt. This comes almost two weeks after the programme was launched.

The IMF’s Dire Forecast 

The International Monetary Fund (IMF) outlined in its report three significant events that are now limiting growth: Russia’s invasion of Ukraine, the dilemma surrounding the cost of living, and the economic downturn in China. Together, they produce a time that might be described as volatile on the economic, geopolitical, and ecological fronts.

According to the projections of the International Monetary Fund (IMF), the overall rate of inflation would drop to 6.5% in 2023 and 4.1% in 2024. The agency took notice of the tightening of monetary policy that has occurred all over the globe in an effort to battle inflation, as well as the strong appreciation of the United States dollar in comparison to other currencies.

The International Monetary Fund (IMF) forecasts that global economic expansion will decelerate to 2.7% in the coming year, which is 0.2 percentage points lower than its prediction from July. Furthermore, the IMF anticipates that the year 2023 will feel like a recession for millions of people all over the world.

The International Monetary Fund (IMF) forecasts that global inflation will “stay higher for longer than originally predicted” and will reach its highest point in late 2022, having increased from 4.7% in 2021 to 8.8%.

The International Monetary Fund (IMF) said in its World Economic Outlook report that was released on Tuesday that, excluding the global financial crisis and the height of the Covid-19 outbreak, this is the lowest growth profile since 2001. The organisation’s GDP forecast for this year has not changed from its previous projection of 3.2%, which is a decrease from the projection of 6% for 2021.

Further shocks may induce market illiquidity, disorderly selloffs, or distress, according to the IMF, which noted that policymakers all around the globe are now confronted with an “unusually tough financial stability environment.”

The report echoed the concerns of the United Nations, the World Bank, and many global CEOs that the worst is yet to come, adding that 2023 will feel like a recession for many people.

Traders now believe that the next few years will be difficult. It is widely predicted that there will be a significant amount of economic suffering and stagnation.

The Events 

The September Producer Price Index data for the US will be released today at 12:30 PM GMT and the forecast for this number is to increase to 0.2% after experiencing a drop of 0.1% in the previous month. The data will be watched and assessed by traders very closely, and it is likely to bring higher volatility for the dollar index.

The main economic event of the day is the Fed Minutes, and it is the monetary policy stance of the Fed that matters the most. The Fed has acknowledged that aggressive monetary policy is counterproductive, but despite this, the Fed is unlikely to change the path of its monetary policy. The Minutes will be released at 18:00 GMT today.