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Despite improving outlook, ECB to hike rates again

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Despite improving outlook, ECB to hike rates again

The European Central Bank is set to hike interest rates again Thursday as it pursues its inflation fight, despite tentative signs the eurozone has weathered shocks from the Ukraine war better than feared.

The ECB launched an unprecedented campaign of monetary policy tightening after Moscow’s invasion of Ukraine, and subsequent cuts to gas supplies, sent eurozone energy and food costs spiralling.

Since July, it has lifted interest rates by 2.5 percentage points to tame consumer price growth — which peaked in October at over five times the bank’s two-percent target.

The bank’s governing council is expected to deliver a half percentage point hike on Thursday, the same as at their last meeting in December.

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But, with inflation starting to slow, this is down from two jumbo 0.75 percentage point lifts before that.

The Frankfurt-based institution’s president Christine Lagarde “should reiterate that inflation… remains too high and reaffirm the absolute necessity for the ECB to continue to act over time to bring it down,” said Franck Dixmier at Allianz.

The Federal Reserve also lifted rates again Wednesday, but downshifted to a smaller 0.25 percentage point increase as inflation cools in the United States.

Meanwhile, the Bank of England is also expected to increase borrowing costs again on Thursday.

In the eurozone, recent data have raised hopes the worst of the economic shock may have passed.

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Eurozone inflation fell by more than expected to 8.5 percent in January, while the 20-nation currency club eked out growth at the end of 2022, defying fears of a contraction.

The less gloomy figures have given cause for hope that Russia’s efforts to strangle crucial gas supplies to Europe may not trigger the economic shock once feared.

As Moscow slashed deliveries following its invasion of Ukraine, European governments rolled out relief measures to cushion consumers and businesses from surging prices, and rushed to fill up storage facilities.

‘More positive’ signs
Wholesale gas prices have been easing while relatively mild winter weather has meant supplies have not been used up as quickly as expected.

Analysts hope that other factors, such as easing supply chain problems and the reopening of China’s Covid-hit economy, are now offsetting the fallout from Ukraine.

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After months of doom and gloom, officials are striking a more positive note about the outlook.

Speaking at the World Economic Forum in Davos last month, Lagarde said the eurozone economy will fare “a lot better” than initially feared, with the news “much more positive in the last few weeks”.

Signs of weakness are still causing concerns, however.

GDP in Germany, Europe’s top economy, unexpectedly contracted at the end of 2022, signalling it may be about to tip into recession.

But it is expected to be a shallow contraction, and the government has forecast the economy will expand slightly over 2023 as a whole.

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While the ECB has stressed it will “stay the course” to bring inflation back to target, policymakers are walking a fine line — seeking to tighten enough but not so much that it dramatically deepens economic pain across Europe.

Most analysts also expect a further 0.50 percentage point hike in March but, with inflation starting to ease, there are already signs of a debate among policymakers about when to slow the pace.

ECB board member Fabio Panetta, known for his dovish stance, said the bank should not commit to any particular hike beyond the forthcoming meeting.

Others, such as Joachim Nagel, the head of Germany’s Bundesbank central bank, have backed further hikes going forward.

All eyes will be on Lagarde’s comments after the rate decision is announced for hints of a future direction.

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Dollar muted as traders await Fed rate decision

Dollar muted as traders await Fed rate decision

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Dollar muted as traders await Fed rate decision

The dollar was pinned near five-week lows on Wednesday ahead of the conclusion of the US Federal Reserve’s policy meeting, with investors awaiting clarity on the path the central bank is likely to take in the wake of global banking turmoil.

Investor attention is zeroed in on whether the Fed will stick to its hawkish path to fight sticky inflation or pause interest rate hikes given recent trouble among banks which has included bankruptcy and last-minute rescues.

The US dollar index, which measures the currency against six peers, was at 103.19, just above the five-week low of 102.99 touched overnight. The euro was at $1.0770, hovering around a five-week high of $1.0789 scaled overnight.

Markets are now pricing in about a 15% chance of the Fed not increasing rates, with a roughly 85% chance of a 25 basis point hike, showed the CME FedWatch tool. Just a month earlier, the market was pricing in a 24% chance of a 50 basis point hike.

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Investor sentiment remained fragile with worries over the outlook for the banking sector starting to ease after sharp volatility in the market in the past few weeks following high-profile U.S. banking failures earlier in the month and the rescue of lender Credit Suisse Group AG at the weekend.

“Markets are seemingly becoming more comfortable with the idea that authorities have probably done enough to prevent a systemic banking crisis,” said Rodrigo Catril, a senior currency strategist at National Australia Bank in Sydney.

“It might be early days, but the price action over the past 48 hours is certainly signalling a change in mood by investors.”

The Fed meeting concludes on Wednesday with the 2 pm EDT (1800 GMT) release of a policy statement followed half an hour later by a news conference by Chair Jerome Powell.

Catril said the Fed faces a difficult choice given a strong labour market alongside February inflation figures that were higher than many market watchers expected. Such circumstances would usually be ripe for a return to a 50 basis point hike were it not for worries over financial stability, he said.

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Christopher Wong, currency strategist at OCBC, said the focus will be on how the Fed communicates its forward guidance, in particular “the higher for longer” rhetoric.

“Ideally, we would like the Fed to go with a 25 basis point hike this meeting, tone down hawkish guidance and emphasize that policy decisions at subsequent meetings will continue to be data-dependent,” Wong said. “This wishlist should see dollar trade on the softer profile and risk proxies trade steadily.”

Meanwhile, the yen strengthened 0.04% to 132.47 per dollar, whereas sterling was last trading at $1.2233, up 0.16% on the day.

The Australian dollar rose 0.36% to $0.6694, while the New Zealand dollar gained 0.11% to $0.6199.

In cryptocurrencies, bitcoin last rose 0.44% to $28,276.58, but was below a nine-month peak it touched on Monday.

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Sui Northern to take special initiatives to ensure uninterrupted gas supply in Ramzan

Sui Northern to take special initiatives to ensure uninterrupted gas supply in Ramzan

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Sui Northern to take special initiatives to ensure uninterrupted gas supply in Ramzan

Sui Northern Gas has announced special initiatives to ensure uninterrupted gas supply to its consumers during the holy month of Ramzan.

The company will be undertaking immediate measures to ensure gas supply with full pressure. SNGPL spokesperson, in a statement, said that domestic consumers will be ensured gas supply with full pressure particularly between 2:30 to 6am and 4 to 9pm.

Spokesperson also stated that company will also ensure natural gas supply other than the mentioned timings. SNGPL has also constituted monitoring teams for immediate resolution of complaints regarding gas pressure.

Additionally monitoring room is being established for gas supply related complaints. SNGPL has requested consumers to consume natural gas wisely during the month of Ramzan.

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Bitcoin climbs to 9-month high as bank turmoil sparks rally

Bitcoin climbs to 9-month high as bank turmoil sparks rally

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Bitcoin climbs to 9-month high as bank turmoil sparks rally

 Bitcoin climbed to a nine-month high on Monday as turmoil in the banking sector drives some investors to turn to digital assets, as the cryptocurrency built on its best week in four years.

The biggest cryptocurrency rose as far as $28,567, its highest since mid-June, and was last up 0.9%, amid growing expectations that central banks would slow the pace of interest rate hikes.

Bitcoin rose 26% last week, its best weekly gain since April 2019, and has soared some 40% in 10 days as turmoil in the banking sector rippled around the globe – culminating, so far, in UBS Group’s takeover of rival Credit Suisse Group AG over the weekend.

Traditional assets such as banking stocks and bonds plummeted on Monday after UBS sealed its state-backed takeover of Credit Suisse, a deal orchestrated in an attempt to restore confidence in a battered sector.

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Top central banks, faced with the risk of a fast-moving loss of confidence in the stability of the financial system, moved on Sunday to bolster the flow of cash around the world. Such a global response has not seen since the height of the COVID-19 pandemic.

“Its stunning rally is the result of the banking crisis, and as the interest rate markets prices in rate cuts in the second half of 2023,” said Tony Sycamore, an analyst at IG Markets, predicting a move towards $32,000 should bitcoin hold above the key support level about $25,000.

Other market players predicted that bitcoin would benefit from central bank efforts to bolster liquidity in the global financial system. It rose to a record of $69,000 in November 2021 after central banks and governments launched unprecedented monetary and fiscal stimulus measures.

“The momentum is all driven by liquidity,” said Markus Thielson at digital asset firm Matrixport in Singapore.

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