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Flash: Inflation does not ordinarily precede recovery - Nomura

FXstreet.com (Barcelona) - Richard Koo, Chief Economist at the Nomura Research Institute comments that long-term interest rates typically rise during an economic recovery.

However, in Japan’s case he is not seeing inflation concerns arise as a rebounding economy approaches full employment. Instead, he feels that the government and BOJ have decided to set an inflation target, generate inflation first, and hope that recovery follows. Further, he feels that this means the usual order of things has been reversed, with inflation coming first and recovery second. He writes, “In this case the increase in long-term rates in response to inflation concerns is likely to occur much sooner than it ordinarily would and may even take place before the recovery takes hold.” He finishes by noting that if the rise in long-term rates precedes the economic recovery, people who had planned to borrow money and invest it in anticipation of inflation could start to have second thoughts, throwing a damper on the nascent recovery.

UK: PSNB at £8.035B in April

UK Public Sector Net Borrowing was £8.035 billion in April, official figures released by National Statistics show, following £12.565 billion registered in March. Analysts expected £7.000 billion.
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Commodities Brief – Precious metals holding ahead of FOMC, crude eyes key support at 95.50

Gold attempted to resume the bearish wave yesterday, after capping at 1400.00 level, where it failed to hold above the 38.2% Fibonacci level for the latest bearish wave. However, Monday’s bullish engulfing candle suggest a potential rebound within the upcoming period, though due the strong downside wave, it is unclear when or if short-term upside attempts will occur today, especially with the FOMC on tap later. At the time of writing, the price of gold is now trading at USD $1383.80 per oz. Wednesday during European trading.
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