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The ECB headquarters in Frankfurt (ilolab / Shutterstock.com)
After a rocky start to September, the US dollar gained almost 1% against the pound and 0.6% against the euro last week as traders became increasingly convinced that the Federal Reserve will keep interest rates higher for longer.
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The FAO World Food Price Index declined 2.1% in August to 121.4 points, the lowest since April 2021. This decline wiped out gains made in July and pushed the index 24% below its March 2022 peak.
On Friday, partial strikes began at two Chevron gas facilities in Australia. These two facilities account for over 5% of the global supply, meaning that European natural gas futures surged 11%. Experts worry that if union talks are prolonged, this could lead to a decrease in liquified natural gas supplies.
The world’s most valuable company, AAPL.O, recoiled more than 6% in just two days since reports on Wednesday that China had ordered central government employees to cease using iPhones at work. Although the severity of the ban is unclear, it wiped a staggering €190 billion from Apple’s market capitalization, Reuters reports.
On Wednesday, the Bank of Canada kept its interest rate at 5.0% in September, but comments from Bank governor, Tiff Macklem have suggested interest rates may not be high enough to tame inflation down back to target.
This morning, the Japanese yen soared to a one-week high against the US dollar after comments from the Bank of Japan’s governor over the weekend. Kazuo Ueda said the central bank could end its negative interest rate policy when 2% inflation is hit.
This morning Huw Pill of the Bank of England will make a speech. Economists hope he will provide insight on the Bank of England’s sentiment towards the next interest rate decision.
This week, UK investors will be looking out for UK unemployment rate on Tuesday and UK GDP figures on Wednesday.
For US economists, data points of note include US inflation rate and CPI on Wednesday, PPI and retail sales on Thursday and the Michigan consumer sentiment index results on Friday.
The big release this week comes from the European Central Bank which is due to announce its latest interest rate decision on Thursday afternoon. This will be followed by an ECB press conference and president, Christine Lagarde will make a speech the following day.
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GBP: Unemployment rate to remain at 4.2%
After the UK unemployment rate increased to 4.2% in the three months to June 2023, the highest level since late-2021. Tomorrow, the figures for July will be revealed and markets predict the rate will remain at 4.2%.
GBP/USD: the past year
EUR: Interest rate forecast to remain unchanged
Ahead of the all-important ECB decision, European shares entered positive territory this morning, as markets prepare for a crucial week. The Bank is expected to leave rates unchanged at 4.25% on Thursday.
Despite rumours that another rate hike is needed to tame high inflation in the euro area, markets expect the ECB will leave the Bank rate unchanged on Wednesday at 4.25%. The rate has steadily increased since April 2022 but currently remains at a 15-year high.
USD: Eyes on US inflation on Wednesday
Wednesday will bring US inflation figures for August. The year-on-year rate is expected to rise from 3.2% in July to 3.4% and the month-on-month rate is expected to increase 0.2%, matching July’s monthly increase.
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