nvestment banks predict U.S. recession in 2023
More than two-thirds of economists at the 23 large financial institutions that have direct business dealings with the Fed believe the U.S. economy will enter a recession in 2023. Two others predicted a recession in 2024.
They listed some red flags, such as Americans are reducing their savings during the epidemic, the housing market is declining, and banks are tightening lending standards. Most economists expect the rate hike to push the unemployment rate above 5 percent from 3.7 percent in November, still low by historical standards but potentially throwing millions of Americans out of work.
They also expect the U.S. economy to shrink in 2023, although it has done relatively well during the 2022 rate hike, which economists say will have a more pronounced cooling effect in 2023. They predict that the Fed may raise interest rates in the first quarter of this year, suspend rate hikes in the second quarter, and start cutting rates in the third or fourth quarter.
The US dollar index is still biased towards weakness
The U.S. dollar index rose 0.22% in light trading on Monday to close at 103.73, not far from the nearly half-year low set last Friday and is currently trading around 103.77.
Adam Button, chief currency analyst at ForexLive, said, "I think everyone is struggling with whether the big problem in 2023 is weak growth or stubborn inflation. If it is weak growth, the dollar will fall. If it is high inflation, then the dollar will rebound."
According to a report on the website of the US "Wall Street Journal" on December 30, 2022, the dollar's rise in 2022 has made the world realize that it has the ability to inflict pain on the global economy. Investors are now optimistic that the dollar's strength has now run its course.
2023 will be tough year for global economy, IMF chief warns
International Monetary Fund (IMF) Managing Director Georgieva said on Sunday (January 1) that 2023 will be a difficult year for much of the global economy because the main engine of global growth -- The U.S., Europe and China — all experienced weaker economic activity.
Georgieva said on CBS's Sunday morning news program "Face the Nation" that the new year will be "harder than the last one."
"Why? Because the three major economies -- the U.S., the EU and China -- are all slowing down at the same time," she said.
Focus on the Fed meeting minutes and follow-up policy expectations
Analysts at TD Securities said they expect the minutes of the Fed's December policy meeting to shed more light on its policy outlook for 2023. It should be noted that although the Fed slowed the pace of interest rate hikes to 50 basis points at its December meeting, the committee said it expects a substantial increase in terminal rates in 2023.
TD Securities sees terminal rates in the 5.25-5.50% range at the May FOMC meeting. At the same time, analysts expect U.S. job creation to gain momentum in December and the number of people employed at the end of last year to increase, the latest sign that U.S. labor market conditions remain tight.
Edward Moya, senior market analyst at OANDA, said last week, "The Fed will likely increase rates by at least 50 basis points in 2023. I wouldn't be surprised if they had to raise rates by 75 basis points. The impact of this year's rate hike will become clear in January." more obvious."
Moya noted that markets expect the Fed to stick with its hawkish rhetoric in 2023, as retreating too early could mean entrenched inflation risks.
RBC expects the last rate hike to come in March. Christopher Louney, commodity strategist at RBC Capital Markets, said last week, "Our economic/rate strategy team currently expects the Fed to raise interest rates for the last time in March 2023. will change."
Economists say the Fed can continue to slow its pace of tightening early next year and then pause or even cut interest rates only if inflation softens for a sustainable period.
TREX Global:After several consecutive and large interest rate hikes in 2022, the Fed has limited room to raise interest rates in 2023, and with more and more signs of slowing inflation, the market expects the Fed to cut interest rates in 2023 gradually. This will provide further opportunities for gold prices to rise in the medium and long term. In addition, concerns about the global economic recession and geopolitical situation also tend to favor the gold market outlook. In the short term, the current fundamentals and technicals are also slightly biased towards bulls, and the price of gold this week is also inclined to fluctuate upwards.
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