Markets will be waiting for very important data from the UK and other major economies this week. The UK’s mini-budget fiasco was among the hot topics recently which led the prime minister to fire her chancellor of exchequer Mr Kwarteng and replace him with Jeremy Hunt. Nonetheless, it does not look like Liz Truss is out of the woods yet after her disappointing press conference on Friday therefore, it is highly likely the Sterling pound to remain under pressure until markets get a clear political and fiscal image in the UK.
Investors will be following the 20th national congress of the Chinese communist party this week. President Xi is highly likely to continue in power and his policy towards Taiwan could stay unchanged given his focus on more urgent issues such as the property-development crisis, the problematic Covid zero policy, youth unemployment and economic growth. Eyes will be also on the Russian-Ukrainian war’s updates as any use of a prohibited kind of weapon could take this war to a different level.
The US inflation report released last week erased any hope of a less-hawkish monetary policy from the Fed this year. Therefore, investors modified their portfolios pressing most US indices and the Gold to close in the red, while the greenback index stabilized above 113.00. On the other hand, the oil price fell by 7% on fears of lower demand due to an expected global recession.
Economic data highlights
Monday 17th of October
Tuesday 18th of October
- JPY- Industrial Production Final (AUG)
Wednesday 19th of October
- NZD- Inflation Rate (Q3)
- RBA Meeting Minutes
- CNH- GDP Growth Rate (Q3)
- CNH- Industrial Production (SEP)
- CNH- Retail Sales (SEP)
- EUR- ZEW Economic Sentiment Index (OCT)
- USD- Industrial Production MoM (SEP)
- USD- NAHB Housing Market Index (OCT)
Thursday 20th of October
- GBP- Core Inflation Rate (SEP)
- GBP- Inflation Rate (SEP)
- EUR- Core Inflation Rate Final (SEP)
- CAD- Inflation Rate (SEP)
Friday 21st of October
- AUD- Unemployment Rate (SEP)
- USD- CB Leading Index MoM (SEP)
- USD- Existing Home Sales MoM (SEP)
High-interest Rates Come with a Price
- GBP- Gfk Consumer Confidence (OCT)
- JPY- Inflation Rate (SEP)
- GBP- Retail Sales (SEP)
- CAD- Retail Sales (AUG)
- EUR- Consumer Confidence Flash (OCT)
The higher-than-expected inflation read (8.2% vs 8.1%) of September revealed last week increased the odds for the fourth 75 bp rate hike in early November and opened the door for the fifth in December. Although, the Fed members would remain data-dependent before deciding the size of any rate hike.
The US interest rate could end 2022 at 4.50% weighing heavily on the housing market with a lower number of mortgage applications and consequently, lower profitability in the construction and furniture sectors leading some related companies out of business.
BoE Monetary Policy
The Bank of England ended its temporary bond-buying scheme announced to slow down the sell-off of the Gilts (UK bonds) triggered by the unfounded tax cuts in the mini-budget.
Eyes will be on the coming meeting of the central bank on November 3rd, to see how aggressively the MPC members will hike rates possibly (75bp to 100bp). The consumer price index data of September (inflation) is expected to rise from 9.9% to 10% yet it is unlikely to be the main decider here however, the UK fiscal policy to be announced by Jeremy Hunt this week could be the main driver of the monetary policy.
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