IMF Lowered Global Economic Expectations Due To Britain'S Departure From Europe

The ECB and the Bank of Japan did not send positive signals this week after the BOE failed last week's policy moves.

The European Central Bank (ECB) chose to maintain interest rates unchanged, which is entirely unexpected, and Delaki's speech did not cause much market reaction.

The Bank of Japan (BOJ) denied the uproar "helicopter money" argument, but failed to effectively suppress market easing expectations.

With a good boost from the US PMI, the US dollar index continued to last week, rising to a four month high of 97.51.

The euro / dollar dollar fell to the lowest level after the British referendum returned to Europe, closing at 1.0978.

In the UK, the purchasing managers' index hit a 8 and a half year low, and the pound / dollar slowly rebounded to 1.31 after falling below 1.31.

In terms of commodities, gold continues to suffer.

The suppression of expectations and profit margins ended in 1322.20 after hitting 3 weeks in mid week.

Crude oil is still constrained by oversupply worries, and it will stay at 44.19. in the 44 interval.

The International Monetary Fund (IMF) said in its report on Tuesday that due to the uncertainty caused by Britain's departure from Europe, they will once again lower the global economic growth expectations in the next 2 years.

This is the fifth reduction in world economic growth expectations in 15 months. In the IMF report, the growth rate of global GDP in 2016 and 2017 is estimated to be 3.1% and 3.4%, respectively, which is 0.1% lower than that predicted in April.

The group said that although the economy of Japan and Europe has improved and some commodity prices have also risen, however, because of the sharp increase in economic uncertainty due to the British referendum, the investment market and consumer confidence will be compromised.

Maury Obstfeld, chief economist of IMF, said that the day before the June 23rd referendum in Britain, IMF was ready to increase its global growth expectations for 2016-2017 years. However, the United Kingdom had disrupted the plan.

IMF points out that its latest expectations are based on the relatively mild political impact of the European Union and the United Kingdom, avoiding the massive increase in economic barriers and the relative relaxation of the financial market.

But the organization has also modeled other situations, including failure of negotiations, intensified financial pressure, the resumption of trade relations between the United Kingdom and the European Union to the rules of the international trade organization, and the loss of London's financial industry in the European continent.

Kuroda denied "helicopter money".

In the Asia Pacific session on Friday, the Japanese yen was hovering near the US dollar at the 6 week low. After a speech by the governor of the Bank of Japan, Kuroda Higashihiko lowered speculation that Japan would be ready to adopt a radical way of "helicopter money disposal" to stimulate the economy.

Under the influence of the news, the yen / dollar rebounded from a 6 week low of 107.49.

The rebound in the yen was triggered by Kuroda's remarks at the Broadcasting British Corporation (BBC) Radio 4 visit.

In its interview, it excluded the "helicopter money" as a monetary stimulus.

Given that Japanese Prime Minister Abe Shinzo is working on a $190 billion spending plan to boost the economy, some speculators have bets the Bank of Japan for financing the extra spending.

BBC later said that the visit to Kuroda Higashihiko was carried out in mid June.

This helped cool down the yen's rise.

But the market is still strong in anticipation of easing action by the Bank of Japan in next Friday's policy meeting, thus limiting the yen's rise.

Koichi Takamatsu, head of foreign exchange at Nomura Securities, said it was clear that Kuroda's comments did not dispel loose expectations.

Basically, the market thinks that it will expand the purchase scale of ETF and REIT and cut interest rates by 0.1%.

At present, few market participants will believe in Kuroda Higashihiko's overall belief. He has publicly expressed no consideration in the first few days when he launched the negative interest rate policy in January.

However, a small number of market participants believe that the Bank of Japan may choose to relax its policy later to save less ammunition.

Minori Uchida, chief foreign exchange analyst at BTMU, MITSUBISHI Tokyo, said the BoJ may relax its policy in November instead of now, when the government's additional budget will be in place.

It is not clear whether the Bank of Japan feels that it is necessary to act now. Even the Bank of England has not relaxed its policy.

ECB stance neutral

On Thursday, the European Central Bank (ECB) announced no doubt about the three largest.

Remain unchanged.

At the beginning of the press conference, ECB President Delaki said that interest rates would be maintained at a current or lower level for a longer period of time. Quantitative easing will continue until inflation achieves sustainable adjustment. QE will continue at least until March 2017.

If necessary, the ECB will use all the tools.

Delaki also said that the ECB has flexibility in designing QE projects. The ECB's QE project is quite successful. The ECB will consider various measures to solve the output gap; the ECB has not yet discussed reducing QE..

He also said that financial markets in the euro area were affected by Britain's departure from Europe, and that when more information was released in the coming months, it would be better able to assess the economic situation.

This suggests that the European Central Bank will introduce new easing measures later this year as Britain's influence has become clearer.

But at the same time, if the facts prove that further actions need to be taken to help achieve policy objectives, the MC will not hesitate to take action to use all the tools within its jurisdiction to boost the economy.

Delaki said in a speech that interest rates would remain low, slightly pigeon pie, but expressed satisfaction with the European market's toughness, and stressed the need for the European Central Bank to be willing and able to act to achieve inflation targets.

JP Morgan Asset Management strategist Thushka Maharaj said the market initially reacted to the European Central Bank's lack of specific action options, but Delaki's speech was very powerful, and it was very important for the European Central Bank to act as well.

Jordan Rochester, an analyst at Nomura Securities, said by e-mail that the ECB will cut its deposit rate to -0.50% in September and extend the maturity date of the asset purchase plan from March 2017 to September 2017.

It also pointed out that in the medium term, the design of asset purchase policy needs major changes.

The ECB's communication today made it possible for action to take place in September, but the central bank did not mention specific policy tools.

State Street Global Markets, European strategy chief, pointed out that the European central bank governor Delaki said the results of the assessment were relatively optimistic about the impact of the recent British off Europe and Turkey coup on the euro area's economic growth and inflation prospects. We are more surprised, but we still expect that the ECB will have the need to further relax the policy later this year. The European Central Bank will continue to innovate in monetary policy as before.

European troubles continue

The terrorist attacks on nice in France just passed, and religious violence in Germany immediately followed. The Middle East refugee policy in Europe is on fire.

On the night of 18, a bloody scene on a German train shocked Europe. The killer was chopping axe and knives, causing many injuries including 4 Chinese Hongkong people.

The protagonist of the incident is only 17 years old, and is a refugee from Afghanistan.

The Islamic state of extremist group quickly claimed the case, and the police found a IS banner in the home of the assailant.

On the evening of 22, a vicious shooting incident occurred in Munich, Germany. Police have confirmed that at least 10 people were killed and at least 10 people were injured.

The local police department said the 10 dead may include the attacker himself.

According to the latest The Associated Press news, the local police department said the suspect was a 18 year old German Iran from Munich, whose motives were "completely unclear".

In recent years, European law and order has gone from bad to worse, and the problem of immigration has been pushed to the top of the storm.

If the EU is still unable to solve this problem properly, I am afraid the internal centrifugal force will further heat up with the UK.

On Thursday, French President Hollande told reporters at the press conference with the new British Prime Minister Theresa May that the British led by Francois had two choices: no restrictions on immigrants from the EU or outside the common market. Hollande

The current situation may be pushing Mei to the latter option.