Investors on the forex market expect that if there is a recession, it will be shallower and not as long as central banks think, Petar Lavov.
Resolving the imbalance between investor and central bank expectations will be a central event for 2023, with markets dominated by interest rates and inflation. Petar Lavov, ex-foreign exchange dealer for BenchMark Finance, and current SEO of Bulls and Bears trading company is expressing his opinion today.
“At the beginning of 2023, investors want to waltz with central banks, and they are doing some kind of war dance like the New Zealand haka. Over time, expectations will converge as central bankers and markets are very different at the moment,” he predicted.
What will happen according to Petar Lavov between the central banks and the forex market in 2023?
According to him, markets expect a continued reduction in inflation, as most of the leading economies showed at the end of 2022, and central banks forecast still rising key rates to be maintained in 2023 and 2024.
The expert believes that because of the warm weather, which crashed the prices of natural gas and electricity, Europe managed to avoid the worst scenarios, and the euro slipped away from the expected crisis, gaining more than 10% in recent months. This, he said, is fueling investors’ expectations that if there is a recession, it will be shallower and not as long as central bankers think.
Lavov stated that it is not possible to predict whether inflation will continue to fall at the current rate. “Energy prices are coming down and that’s having an effect, but it remains to be seen whether the services and food sectors will bring back some of the appreciation,” he pointed out.
Petar Lavov expects the fall in inflation from now on to be lower than in the last two or three months.
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