InvestMacro

By ForexTime 

Red-hot inflation remains a scourge for the global economy, undermining its post-pandemic recovery. In response, central bankers have been furiously hiking interest rates in other to tame runaway consumer prices.

Over the coming week, GBPUSD traders will be assessing the impact from the latest inflation readings out of either side of the pond, along with a crucial Bank of England rate decision:

Monday, September 12

• GBP: UK July monthly GDP, industrial production, external trade
• EUR: ECB Executive Board member Isabel Schnabel’s speech

Tuesday, September 13

• AUD: Australia August household spending, business confidence, September consumer confidence
• GBP: UK July unemployment rate, August jobless claims
• EUR: Germany August CPI (final), September ZEW survey expectations
• USD: US August CPI
• Twitter shareholders to vote on sale to Elon Musk

Wednesday, September 14

• JPY: Japan July industrial production (final)
• GBP: UK August CPI
• EUR: Euro area July industrial production
• US crude: EIA weekly oil inventory report

Thursday, September 15

• NZD: New Zealand 2Q GDP
• AUD: Australia August unemployment rate, September consumer inflation expectations
• GBP: Bank of England rate decision
• USD: US weekly initial jobless claims, August retail sales, industrial production

Friday, September 16

• CNH: China August industrial production, retail sales, jobless rate
• EUR: Eurozone August CPI (final)
• USD: US September consumer sentiment

And here are the market forecasts for the following key events:

1. (Tuesday) US August CPI: 8.1% year-on-year (lower than July’s 8.5% print).

   If so, that would mark two straight months of easing in the headline annual print, which markets may perceive as a sign that US inflation has peaked. Such a trend should eventually allow the Fed to back away from supersized rate hikes, while potentially prompting the US dollar to moderate.

   Still, the core CPI year-on-year figure is expected to come in at 6.1% – its highest since April. That suggests that the Fed’s battle against inflation is far from over.

2. (Wednesday) UK August CPI: 10.4% year-on-year (higher than July’s 10.1%).

   UK households are already contending with a cost-of-living crisis, with headline inflation having punched its way into double-digit territory well ahead of forecasts.

   Yet another higher-than-expected CPI reading would only darken the economic outlook for the UK, and underscore the tremendous battle facing the Bank of England.

3. (Thursday) BOE rate decision: At the time of writing, markets are pricing in a mere 18.4% chance that the Bank of England will press ahead with a 75-basis point hike.

   However, a higher-than-expected UK CPI print could raise the odds for such a bumper hike which would be the BOE’s largest since 1989.

   A 75bps hike would also help the BOE keep up with similar moves already made recently by its major peers such as the US Federal Reserve and the European Central Bank.

Ultimately, GBPUSD traders may face a range of scenarios, depending on how those CPI prints and the keenly-awaited BOE rate decision play out:

• Higher-than-expected CPI prints, either for the US or the UK, that prompt markets to expect more incoming jumbo-sized rate hikes by its central bank could lead to a stronger currency.
• A lower-than-expected inflation figure that pares market bets for the size of the incoming rate hikes should move that currency lower.
• If the Bank of England sticks with a “relatively dovish” 50-basis point hike, while signalling growing concern for the UK economy, that may also prompt GBP declines.
• Should the BOE indeed trigger that massive 75bps hike, while telling markets to keep expecting more of these larger hikes in the coming months, that may translate into limited GBP gains.

At the time of writing, GBPUSD is enjoying some relief as it pokes its head back above 1.160 while pulling away from its lowest since 1985.

However, GBPUSD’s upside remains significantly capped by the negative sentiment surrounding the UK economic outlook, with markets currently pricing in a greater chance (34.3%) that ‘cable’ would trade back below 1.15 rather than back above 1.17 (30.9%) over the coming week.

Much would depend on the actual CPI figures, and the Bank of England’s official decision and comments surrounding its path forward for UK interest rates.

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

By JustForex

Queen Elizabeth II, the longest reigning monarch in British history, died at age 96, Buckingham Palace announced Thursday. The 96-year-old queen ascended the throne in 1952 at age 25, after the death of her father, King George VI, as Britain was recovering from World War II. A 10-day mourning period has been declared in Britain.

The US stocks increased on Thursday despite hawkish comments from Federal Reserve Chairman Jerome Powell about another major interest rate hike in September. There is a nearly 90% chance of such a move. Goldman Sachs also raised its interest rate forecast to 75 basis points this month from 50 basis points earlier. Chicago Fed President Charles L. Evans, who tends to take a dovish side in the monetary policy debate, said Thursday that the Fed may well raise the rate by 75 basis points at its September meeting.

As the stock market closed yesterday, the Dow Jones Index (US30) increased by 0.61%, and the S&P500 Index (US500) added 0.66%. The NASDAQ Technology Index (US100) jumped by 0.60% on Thursday. The S&P 500 Index is still nearly 8% away from its August peak and is down about 17% since the beginning of the year.

Equity markets in Europe traded without a single dynamic yesterday. Germany’s DAX (DE30) lost 0.09%, France’s CAC 40 (FR40) added 0.33%, Spain’s IBEX 35 Index (ES35) increased by 0.78% and the British FTSE  100 (UK100) closed on Tuesday in plus 0.33%.

The European Central Bank raised its three official interest rates by 75 basis points, the largest interest rate change in ECB history. The Сentral Bank also warned of further hikes as it struggles to bring record-high inflation back under control. At her regular press conference, ECB President Christine Lagarde said she expects the ECB to raise rates by “more than two more but less than five” meetings in the future, but left open the question of the extent of these rate changes. She stressed that steps of 75 basis points “are not the norm,” but said she did not know at what level the bank could stop tightening.

The new British prime minister, Liz Truss, announced yesterday that a household will now pay no more than 2,500 pounds ($2,880) a year for each for the next two years. The restriction will take effect October 1. According to politicians, such a move will reduce inflation to 5%. A similar guarantee for businesses will be in effect for the next six months. Then there will be further support for vulnerable sectors. Reports also said that a £40 billion package would be passed to support businesses with their energy costs, bringing the total expected amount of support measures to £180 billion.

Crude oil prices rose about 1% on Thursday after falling to a seven-month low in the previous session as Russia threatened to halt oil and gas exports to some customers. The US crude inventories data showed an unexpected increase of 8.8 million barrels last week.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) gained 2.31% yesterday, Hong Kong’s Hang Seng (HK50) decreased by 1.00%, and Australia’s S&P/ASX 200 (AU200) added 1.77% by the end of the day.

The Chinese economy is under pressure because of the ongoing restrictions. Yesterday the second largest city of Chengdu extended the quarantine as the number of cases of coronavirus infection increased. With rising inflation and problems facing the economy, the People’s Bank of China must decide whether it will prioritize supporting the economy. China’s inflation rate decreased from 2.7% to 2.5% in annual terms.

S&P 500 (F) (US500) 4,006.18 +26.31 (+0.66%)

Dow Jones (US30) 31,581.28 +193.24 (+0.61%)

DAX (DE40) 12,904.32 −11.65 (−0.090%)

FTSE 100 (UK100) +24.23 −62.61 (+0.33%)

USD Index 109.67 +0.17 (+0.16%)

• – Japan GDP (q/q) at 02:50 (GMT+3);
• – China Consumer Price Index (m/m) at 04:30 (GMT+3);
• – China Producer Price Index (m/m) at 04:30 (GMT+3);
• – Canada Unemployment Rate (m/m) at 15:30 (GMT+3);
• – US FOMC Member George Speaks (m/m) at 19:00 (GMT+3).

By JustForex

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By JustForex

Despite the fact that the Federal Reserve officials reiterated the need to tighten monetary policy to curb inflation, US indices were trading in positive territory on Wednesday. The technology sector, which has been under pressure in recent days, was also supported by lower Treasury yields. At the close of the stock market yesterday, the Dow Jones Index (US30) increased by 1.40% and the S&P 500 Index (US500) added 1.83%. The NASDAQ Technology Index (US100) jumped by 2.14% on Wednesday.

Fed Vice President Lael Brainard said Wednesday that monetary policy should be restrictive for some time, adding that the central bank would need to see several months of low inflation figures to see if inflation is slowing.

Shares of Apple Inc. rose modestly after the introduction of a slew of new products, including the iPhone 14, the iPhone 14+, the top models of the iPhone 14 Pro, and the larger iPhone 14 Max. Analysts say Apple’s new phone will cause a strong update cycle, as many iPhone buyers haven’t updated their phones in years.

Meanwhile, Twitter shares added more than 5% after a Delaware court rejected Elon Musk’s request to delay a lawsuit that Twitter had launched to prevent the billionaire from backing out of a deal to buy the social network.

The Bank of Canada held its fourth consecutive interest rate hike in an effort to lower inflation from a four-year high. Policymakers led by Governor Tiff Macklem raised the benchmark overnight rate by 75 basis points to 3.25% on Wednesday, giving Canada’s Central Bank the highest interest rate among major advanced economies.

Equity markets in Europe traded flat yesterday. German DAX (DE30) gained 0.53%, French CAC 40 (FR40) added 0.02%, Spanish IBEX 35 (ES35) increased by 0.17%, British FTSE 100 (UK100) closed on Tuesday down 0.86%.

The ECB will hold its monetary policy meeting today, where analysts expect to see an excessive interest rate hike of 0.75%. Taking into consideration yesterday’s EUR strengthening, there is a good reason to believe that investors are already buying European currency in the expectation that the ECB will hold an uncharacteristic aggressive rate hike. But according to analysts, irrespective of the euro reaction direction on Thursday, there is a high probability that the effect on the currency rate will be temporary. This is because EUR/USD has been reacting weakly to ECB rate expectations lately, as the energy crisis continues to shape the dynamics of the pair.

According to analysts, the energy crisis in Europe will only worsen this winter as rising fuel prices reduce consumer demand and force factories to cut production or close, which is a very bad scenario for Europe.

Oil prices fell by 5% yesterday. Analysts see the following reasons for the drop in oil prices in recent days: the twenty-year high of the dollar, which increased the cost of buying crude oil for other currencies; growing quarantine measures in China; concerns about the third consecutive 75 basis point increase in rates by the US Federal Reserve at a meeting on September 21; G7 efforts to limit Russia’s selling price of oil in order to deprive Moscow of the maximum revenue it seeks from energy exports to finance its war against Ukraine; the finish line in negotiations over the Iran nuclear deal, which could potentially return hundreds of thousands of barrels of Iranian oil to the world market.

“There are fears that an angry Putin will stop all oil and gas supplies to Europe to teach the West and the world a lesson for trying to unite against Mother Russia,” said John Kilduff, a partner at the New York-based energy hedge fund Again Capital.

Gas prices in Europe decreased by 14%. Gas prices are down amid reports that European gas storage facilities are filling ahead of schedule.

Asian markets were trading lower yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.71% yesterday, Hong Kong’s Hang Seng (HK50) lost 0.83%, and Australia’s S&P/ASX 200 (AU200) was 1.42% lower by the end of the day.

The Japanese currency keeps losing ground, and the reason for that is not only the interest rate differences between the Bank of Japan and other central banks. Another problem for the yen is the change in the trade balance. The country used to have a constant trade surplus, but with energy prices skyrocketing and Japan importing most of its energy from abroad, it is facing a trade deficit. Combined with the ban on tourists visiting the island, demand for the yen dropped sharply.

Australia’s index fell at the opening market on Thursday after data showed the country’s trade balance contracted more than expected in July.

S&P 500 (F) (US500)  3,979.87 +71.68 (+1.83%)

Dow Jones (US30) 31,581.28  +435.98 (+1.40%)

DAX (DE40) 12,871.44 12,915.97 (+0.35%)

FTSE 100 (UK100)  7,237.83 −62.61 (−0.86%)

USD Index 109.55 −0.66 (−0.60%)

• – Japan GDP (q/q) at 02:50 (GMT+3);
• – Australia RBA Governor Lowe Speaks at 06:05 (GMT+3);
• – Switzerland Unemployment Rate (m/m) at 08:45 (GMT+3);
• – Eurozone Marginal Lending Facility (m/m) at 15:15 (GMT+3);
• – Eurozone ECB Monetary Policy Statement (m/m) at 15:15 (GMT+3);
• – Eurozone ECB Interest Rate Decision (m/m) at 15:15 (GMT+3);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
• – Eurozone ECB Press Conference at 15:45 (GMT+3);
• – US Fed Chair Powell Speaks at 16:10 (GMT+3);
• – Eurozone ECB President Lagarde Speaks at 17:15 (GMT+3);
• – US Natural Gas Storage (w/w) at 17:30 (GMT+3);
• – US Crude Oil Reserves (w/w) at 18:00 (GMT+3).

By JustForex

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.