Daily Brief, January 23, 2023: Brazil and Argentina Prepare to adopt “Sur”, The New Common Currency.

Brazil And Argentina are Preparing to Adopt a Common Currency.

Brazil and Argentina are preparing to announce the start of preparatory work for adopting a common currency this week.

The two South American economies are due to discuss the plan at a summit in Buenos Aires this week, and other Latin American countries will also be invited to join. The initial focus will be on how the new currency, which Brazil has proposed to be called “sur,” meaning the south, can enhance regional trade and reduce dependence on the US dollar.

The Argentine Minister of Economy, “Sergio Massa,” said that There would be a decision to study the necessary criteria for the common currency. The discussion will include everything from financial issues to the size of the economy and the role of the two central banks. He added: I do not want to make false expectations. It would be the first step in a long road that Latin America must travel. The Argentine minister also stressed that this initiative would be presented to other Latin American countries. At the same time, Massa emphasized that the project may take years to come to light, pointing out that it took Europe 35 years to issue the euro.

The joint currency project had been discussed between Argentina and Brazil over the past few years, but the talks stalled due to the Brazilian central objection to the idea. However, both countries are run by leftist leaders, which grants the project the political support it needs.

Gold Prices Continue to Rise Due to the Dollar’s Decline

Gold prices rose in early Asian trading on Monday, January 23rd, supported by the dollar’s decline and prospects for the Federal Reserve to slow down interest rate hikes. The gold price rose 0.1% to $1929.04 an ounce, and there was little change in US gold futures at $1929. The dollar index fell 0.1%, making gold priced in US dollars cheaper for holders of other currencies.

The Fed is expected to again slow down the pace of interest rate increases during its policy meeting on January 31st and February 1st while signaling that its fight against inflation is far from over.

As for other precious metals, the spot silver price rose 0.2% to $24 an ounce, platinum fell 0.2% to $1041.75, and palladium rose 1% to $1744.86.

Oil Prices Fell Due to East Asia’s Lunar New Year Holiday.

Oil prices fell on Monday, January 23, at the beginning of limited trading due to the Lunar New Year holiday in East Asia but maintained most of the gains made last week on the possibility of an economic recovery in China, the largest oil importer, this year.

Brent crude futures fell to $87.17, while US crude futures fell to $81.24 a barrel. Last week, Brent rose 2.8%, while US crude rose 1.8%.

The head of the International Energy Agency, Fatih Birol, said on Friday that energy markets could be in short supply this year if the Chinese economy rebounds in the way financial institutions expect it. The traffic surge in China ahead of the Lunar New Year holiday sends a message of optimism to fuel demand after the two-week holiday. The EU-G7 alliance will cap Russian refined product prices from February 5, in addition to the alliance’s cap on Russian crude oil prices since December and the EU’s ban on Russian crude imports by sea.

The G7 agreed to postpone the review of the Russian oil price ceiling level to March, a month later than initially scheduled, to allow assessing the consequences of imposing a ceiling on the prices of oil products.

Japanese Markets Await in Suspense the New Central Bank Governor.

Japanese Prime Minister Fumio Kishida said that he would consider the economic situation in April when selecting the next Governor of the Bank of Japan.

Financial markets are closely watching who will succeed Haruhiko Kuroda, whose five-year term as president of the bank ends on April 8

There is speculation among some market players that the central bank may abandon its stimulus policy when the Bank of Japan’s leadership changes. There is also talk of possible changes to the agreement between the central bank and the government, under which the Bank of Japan pledges to achieve its 2% inflation target as soon as possible.

“The Bank of Japan and the government act to achieve economic growth, including structural wage increases and lasting price stability. This basic position will not change,” Kishida said.

Fed Governing Council Member Supports 25-point Rate Hike Next Meeting.

Christopher Waller, a member of the Federal Reserve’s Board of Governors, said he supports a rate hike of about 25 basis points at the next meeting. Waller said in remarks over the weekend that the Fed could reduce the rate hike but at the same time stressed that it was not the time to declare victory in the battle against inflation. He added: The current data indicates a little turbulence in the future, so I prefer to increase interest by about 25 basis points at the next meeting.

Nevertheless, Waller stressed that there is still a long way to go to reach the inflation target of 2%, so he expects support for continued tightening of monetary policy. The Fed slowed the pace of monetary tightening at its last meeting in 2022 to 50 basis points.

He continued: The market has optimistic expectations that inflation will fade, but we have a different view. Inflation will not end miraculously but with hard work; therefore, we will have to maintain high-interest rates for a more extended period.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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