Week Ahead Preview 12th of September

Markets expect key data releases this week including the bank of England’s rate decision and inflation figures in the US. Investors will keep an eye on the US CPI figures for August despite their belief that the Fed is likely to hike interest rates by 75 bp in September’s meeting.
 
The hawkish Fed members’ tone led the US Dollar index to hit a near 20-year high last week, while the oil price slipped to a near eight-month low on concerns of lower demand due to recent lockdowns in Chinese cities to stop the Coronavirus spread. However, the price rebounded higher after Russia threatened to halt oil and gas exports as the EU considered a price cap on Russian oil and gas.

Economic data highlights

Monday 12^th of September

• GBP - GDP (JUL)
• GBP - Manufacturing Production (JUL)

Tuesday 13^th of September

• AUD - Consumer Confidence Index (SEP)
• EUR - Inflation Rate Final (Germany- AUG)

• GBP - Unemployment Rate (JUL)
• EUR- ZEW Economic Sentiment Index (SEP)
• USD- Inflation Rate (AUG)

Wednesday 14^th of September

• GBP - Inflation Rate (AUG)
• EUR - Industrial Production (JUL)
• USD - PPI (AUG)

Thursday 15^th of September

• NZD - GDP Growth Rate (Q2)
• AUD- Unemployment Rate (AUG)
• BoE Interest Rate Decision
• USD- Retail Sales (AUG)
• USD- Industrial Production (AUG)

Friday 16^th of September

• CNY- House Price Index (AUG)
• CNY- Industrial Production (AUG)
• CNY- Retail Sales (AUG)
• GBP - Retail Sales (AUG)
• EUR- Core Inflation Rate Final (AUG)
• CAD- Unemployment Rate (AUG)
• USD Michigan Consumer Sentiment (SEP)

 
Bank of England’s Meeting
 
The Bank of England’s meeting will still take place on Thursday despite Queen Elizabeth II’s mourning. The double-digit inflation figure of July at 10.1% increases the pressure on the central bank to continue its contractionary monetary policy.
 
The MPC members could hike interest rates by 50 bp, even though some members could vote for a 75 bp given the British Pound price decline against the US dollar and due to other central banks’ aggressive policies like the EBC which hiked interest rates by 75 bp last week, while the Fed is expected to hike interest rates by 75 bp for the third time in a row on the 21^st of September.
 
Inflation Data
 
Markets expect the US inflation headline to fall from 8.5% (Jul) to 8.1%(Aug) thanks to the fall in oil prices. The WTI declined by nearly 9% in August from $98.38 to $89.50.
That said, it is highly likely to see the Fed hiking by 75 bp in its September meeting given the hawkish tone of the FOMC members in every speech they gave on one hand and the August jobs report that revealed a robust growth in the US job market on the other.
 
Any lower-than-expected CPI numbers in August combined with the weaker wage pressure revealed by the August job report could lead the Fed to slow down its hike pace to 50 bp in November and possibly 25bp in December.