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Forex News May 16, 2022

Ratings

  • Fitch Ratings expects the global fiscal recovery to slow in 2022 and 2023.
  • According to Fitch Ratings, the global fiscal recovery in 2021 that followed the Covid-19 shock in 2020 has slowed sharply, owing to higher commodity prices, rising inflation in general, higher borrowing costs, slowing real GDP growth, and the war in Ukraine.
  • Fitch ratings predicts a slower global fiscal recovery in 2022 and 2023.
  • Fitch says the global fiscal recovery in 2021 that followed the covid-19 shock has slowed sharply, because of higher commodity prices and rising inflation, among others.
  • Fitch says that in 2021, the global fiscal recovery will be affected by increased borrowing costs, slowing real gdp growth, and war in Ukraine.
  • Fitch says policy interest rates are increasing, and fitch believes this ends the era of very low government borrowing costs.

Saudi

  • Saudi energy minister says we will go to 13.2-13.4 mln bpd subject to what we do in the divided zone by the end of 2026 or the beginning of 2027. He says we can maintain production when we get there if the market demands it
  • He also said,  when demand is growing as a result of pandemic recovery, we are facing the reality that oil facilities have shrunk and are shrinking. He mentioned it is not an issue of crude availability • says there is no refining capacity commensurate with the current demand
  • He said we’re improving with our kuwaitian friends on the neutral zone, trying to first return to old capacities and are moving to the development of durra gas field
  • He stressed that the power generation will switch to gas and renewables domestically will free a million bpd of oil for export and  are running out of capacities at all levels in the energy sector is a global issue for the world to attend to also aramco is not considering more upstream investment
  • He at the end said we have no money to waste on anywhere else outside of saudi arabia

ECB

  • Two powerful economic forces are exerting pressure on the ECB’s monetary policy.
  • The asset purchases could be terminated at any time during the third quarter.
  • The European Central Bank kept its benchmark interest rates unchanged, as expected, and stuck to its decision to end the stimulus programme in the third quarter of this year, but did not provide any additional details, disappointing markets, as many expected a hawkish reaction in light of rising inflation, which prompted a number of major central banks to begin tightening policies.
  • The main obstacle, according to ECB President Christine Lagarde, is growing uncertainty about the war in Ukraine, but the central bank will maintain optionality, gradualism, and flexibility in conducting monetary policy.
  • The end of asset purchases could occur at any time during the third quarter, but there is no timetable for when the central bank will begin to raise rates, adding that rate hikes could occur weeks or even months after the stimulus ends and when the ECB arrives.
  • The European Central Bank’s unexpectedly dovish stance suggests that it is diverging from all major peers, as the US Federal Reserve and the Bank of England have already begun to tighten their policies after nearly three years, with the US central bank leading on expectations for eight or more hikes in the next two years.
  • Lagarde supported the central bank’s decision to remain on hold due to the situation in Ukraine, as all 19 eurozone economies are heavily exposed to the conflict, which further erodes confidence and adds to the ongoing supply disruptions that began during the coronavirus pandemic.
  • The bloc’s members are also concerned about the negative impact of sanctions imposed on Russia, as the newest plan to add Russian oil and natural gas to the list of banned items imported from Russia, as the bloc is currently lacking unity on this issue, with strong dissonant tones coming from Germany, the EU’s largest economy, Hungary, and Slovakia.
  •  If all members agree to impose sanctions on Russian energy, the already fragile bloc’s economy will be further weakened, leaving most of the union’s countries in recession, a scenario that everyone wants to avoid.
  • Continuing to pump money into the economy, despite the ECB’s announcement that it will end purchases sometime in the third quarter, will fuel inflation, which is already at an all-time high, and risk undermining economic growth, pushing the bloc’s economy into recession.

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