December 9, 2022

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Chief Economist: - Terrible news for the global economy

Chief Economist: – Terrible news for the global economy

The British pound has fallen for most of 2022, but gained strength last week when new British Prime Minister Liz Truss unveiled a plan for tax cuts to support economic growth.

A minister in Boris Johnson’s government claimed that a motion of no-confidence against Prime Minister Liz Truss was under way. Swedbank believes that pumping another £150bn into an already overheated economy must be a mistake.

As if this were not enough, Mohamed El-Erian, chief economist at Allianz, now points out that the dollar is now rising significantly in value and that this is not a positive for the markets. Against the dollar, the pound is down 21 percent so far this year, the Japanese yen is down about 20 percent, and the euro and Thai baht are down more than 15 percent.

– We have reckless pricing for the dollar. El-Erian says it’s terrible news for the global economy and businesses CNBC.

That’s what Dan Niles, a hedge fund manager says. – We are up for this year, but not because of our long positions. Niles says it’s because of the shorts. From the sharing tip, chip manufacturer Nvidia is now back. JPMorgan has a target price of $220, while Citi has set a target price of about $250. This doubles the current exchange rate.

Chaotic markets

The reason for the appreciation of the dollar is precisely because many see it as a safe haven, and this is causing the currency to rise. Chief Economist Eric Leaf says many have turned to the dollar because it is “the cleanest, dirty shirt”.

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But El-Arian has been warning about this for a long time.

On the other hand, a strong dollar reduces inflation in the United States, but at the same time it has serious consequences for developing countries when your dollar debt rises as a result of a currency appreciation. It happened in the 1980s when several countries in Latin America collapsed after raising interest rates to fight inflation at the time.

– This is not just a paradigm shift. It’s about authorities and central banks that are sources of volatility, El-Erian says, not curbing volatility, referring to the authorities in Great Britain and the Federal Reserve.

It’s chaotic in these markets, which are the main markets in the global economy.