With September just a few days away, here are the top five factors we watch in the trading and investing markets in the US, UK and EU.
The slight drop in annual inflation in the United States encourages cautious optimism. The question is whether this will be enough to persuade the Federal Reserve to slow down its hawkish movement. At this point, that seems unlikely. Inflation would need to come down significantly to reassure monetary policy makers, whose main task is to keep inflation around the 2% target.
The inflation rate in the UK hit double digits, rising to 10.1% on an annual basis in July. It seems likely that inflationary pressures will continue in September, pushing the Bank of England (BoE) into more aggressive interest rate hikes.
Inflation in the eurozone remains a concern for the European Central Bank (ECB), as it reached 8.9% in July. With few signs of slowing inflation, the ECB could begin to take more aggressive steps to tighten monetary policy, including raising key interest rates in September.
Central Bank Decisions on Interest Rates
Given the high importance of interest rate changes amid inflationary pressures, we’ve listed the key central bank meetings in September below:
- FOMC Meeting: September 20-21, 2022
- ECB meeting: 22 September 2022
- BoE meeting: September 15, 2022
GBP, EUR and USD currency pairs are likely to see some volatility in the last two weeks of September ahead of central bank statements.
Gross Domestic Product (GDP) Growth
Can the United States emerge from the technical recession it entered in the second quarter? We won’t know the answer until October 27, when the Bureau of Economic Analysis (BEA) releases the first GDP figure for the third quarter.
Another pressing question for global growth relates to developments in the UK, where recession fears are mounting after GDP fell 0.6% in June.
High inflation and reduced purchasing power due to the weak euro are risks to eurozone growth in the near term.
The conflict in Ukraine is expected to continue to cause concern in the trading and investment markets, particularly due to soaring fossil fuel prices and the general feeling of mistrust. The humanitarian and economic costs have taken their toll over the past six months and, in the absence of a peace agreement, the geopolitical repercussions could be felt until the end of the year.
Is crude oil expensive because of demand pushing inflation up or because the dollar is so strong against other currencies as of this writing? This question could be answered in the fourth quarter if inflation continues to decline in the United States.
The dollar strengthened on safe-haven buying after the Fed began to tighten monetary policy. As long as the US central bank remains on a hawkish trajectory, the dollar and USD-denominated assets, such as crude oil, could remain strong in the fourth quarter.
To summarize our outlook, trading and investment markets could be impacted by high inflation, rising interest rates and tighter monetary policy, growth concerns, geopolitics and the strength of the USD.
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