Most Crucial Economic Events in the Second Half of 2023 – Part 2

<p>With
the global economy weakening, you may wonder what will impact capital markets
in the second half of 2023. Will the food crisis worsen again? What factors
will influence European currency this winter? What will be the key themes of
the year ahead? Several vital stories in the remainder of 2023 are worth
considering when investing in global markets.</p><p>The food crisis of 2022–2023 worsens
again</p><p>One
of the most significant food crises in history, affecting more than 1 billion
people worldwide, continues into the second half of 2023. Over a quarter of a
billion people are estimated to suffer from acute hunger, and some are on the
brink of starvation. The situation has not improved now. Economic factors have
added to climate problems, the effects of the pandemic, and the Ukrainian
conflict.</p><p>In
2022, there were disruptions in global supply chains due to the coronavirus
pandemic. Subsequently, with the beginning of the Ukrainian conflict, they
worsened—there was a sharp jump in food prices (wheat, rice, corn, vegetable
oil, and others). The world was cut off from the supply of goods, primarily
grain—a food crisis broke out.</p><p>In
2023, the world is still in a situation of low cereal availability. Still, it
is exacerbated by a strong U.S. dollar, which has strengthened due to the
tightening of monetary policy in the U.S. Low-and middle-income countries
importing food (mainly countries on the African continent) are unable to do so
because of high prices and devaluation of local currencies against the dollar. </p><p>Reduced
availability of grain crops is a fact of life. The current harvest season in
July–August promises severe grain shortages and maise worldwide. Key importers
are already buying in anticipation of future needs. In the autumn-winter
period, prices for major grain crops will likely rise, which can be used for
speculative transactions in grain futures.</p><p>Europe's energy crisis is not over</p><p>The
energy crisis in the EU is still being felt in the gas market. Gas prices in
2022 were significantly higher than in the previous year. Although the period
of wild prices last year is over, this does not mean the problem has
disappeared. </p><p>Gas
demand is down in 2023, but not due to efficiency improvements or structural
changes in the energy sectors. The main reason for the decline in demand is the
fall in production in energy-intensive industries, especially in the chemical
one. This has reduced the need for gas and lowered its cost.</p><p>Although
the EU has accumulated significant gas reserves, a cold winter could pose a
challenge to the region's energy security. If reserves are depleted, prices
will start to rise again. In addition, the lack of reliable pipelines,
including Nord Stream, is forcing a turn to more expensive liquefied natural
gas (LNG). This creates additional problems and financial costs for consumers
in Europe.</p><p>'This puts the ECB in a difficult position.
On the one hand, there's a falling production and on the other—high prices. You have to choose between low inflation and recession on the one hand
and a weak euro and high inflation on the other hand', said Kar Yong Ang,
the Octa financial market analyst. 'And,
therefore, it is possible that euro currency will once again go to parity with
the dollar', he added.</p><p>The meeting of OPEC and non-OPEC members
on 26 November in Vienna will determine the oil prices</p><p>On 26
November, the 36th semi-annual OPEC and non-OPEC Ministerial Meeting will be
held in Vienna. The meeting will discuss the extension of the oil production
cut agreement. From May until the end of 2023, many OPEC+ countries (Saudi
Arabia, UAE, Kuwait, Iraq, Algeria, Gabon, Kazakhstan, Azerbaijan, and Oman)
decided to further voluntarily reduce oil production by another 1.2 million
bpd, while Russia extended its voluntary restrictions also until the end of the
year. As a result, the total voluntary reduction from May to December should
amount to 1.66 million bpd.</p><p>Depending
on the decision made at the meeting, the overall oil supply may change. In case
of its stronger reduction, the price of oil will rise. If there are no changes
due to the meeting, or they decide to increase production, the cost of oil will
fall. Therefore, it is recommended to make all trading decisions related to
Brent and WTI trades with the upcoming meeting in mind.</p><p>Conclusion</p><p>We
live in an unstable economic and political environment of challenge and
turmoil. However, amidst the challenges, there are opportunities for those
investors who keep their finger on the pulse of the action. From September 2023
onwards, there will be many opportunities, starting with the U.S. Federal
Reserve's interest rate decision and OPEC meeting in Vienna. How to utilise the
opportunities we have described is up to you. The only thing is that they
should not be ignored.</p><p>About Octa</p><p><a href="https://www.octafx.com/?utm_source=media&amp;utm_medium=pr&amp;utm_campaign=evergreen3.2&amp;utm_content=ww_fx" target="_blank" rel="follow">Octa</a> is an international broker that has been providing
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to financial markets and various services already utilised by clients from 180
countries with more than 42 million trading accounts. Free educational
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company is involved in a comprehensive network of charitable and humanitarian
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This article was written by FL Contributors at www.forexlive.com.