Fed Set to Skip a September Hike, But Will It Flag One for November?

The Federal Reserve is widely anticipated to keep interest rates unchanged at its September meeting but what investors are more anxious to find out is whether policymakers will keep the door open to further hikes. The other big discussion point is about the rate path in 2024, specifically, if the median dot plot will be revised higher.

Bank of England Preview: Peak Approaching

BoE call. We expect the Bank of England (BoE) to hike the Bank Rate (key policy rate) by 25bp on 21 September, bringing it to 5.50%. We expect the vote split to be 8-1 favouring a 25bp hike over keeping the Bank Rate unchanged. Markets are currently pricing around 18bp for the meeting this week. Note, there will be no updated projections at this meeting nor a press conference following the announcement.

Sunset Market Commentary

Only the ECB’s March 2024 forecasts can confirm that inflation is heading unequivocally and steadily toward the 2% goal. If the ECB rates were at a top, it will be necessary to stay there for quite some time and spend the winter, spring and summer there, according to Kazimir. He says that the debate is now open to adjust the pace of quantitative tightening but wouldn’t touch the control buttons for the next six months.

Cautious Start With An Abundance of Central Bank Meetings Ahead

A cautious start to the week ahead of a bunch of central bank meetings that will likely set the tone for the remainder of the year. There's every chance that by the end of this week, the bulk of the major central banks have ended their tightening cycle and in many cases, signaled such as the ECB did last week. They'll never say definitively that it's over but, as the ECB did, they may indicate that it's their current view that they've hiked enough.

Impact of UAW Strike on FX Market

The longer this strike lasts, the greater the impact on the economy, which will eventually impact the FX market.  An extended strike that lasts more than a couple weeks, will start to rattle markets.  It seems, Wall Street has

RBA Board Minutes Show It Considered A Rate Hike in September

The RBA Board considered both options but the case for on hold was clearly stronger. The Board is maintaining its options to hike again if inflation surprises to the upside.

Hawkish Pause?

If the Fed is not expected – not even a little bit – to hike rates this week, the Bank of England (BoE) could hike the bank rate by a final 25bp on Thursday. It’s possible that a hawkish pause from the Fed propels the dollar higher, while a dovish hike from the BoE has the opposite impact on sterling. Cable slid below its 200-DMA last week and is now back in a long-term bearish trend.

Mild Setback in US (Real) Yields Took Some Shine of Dollar

The mild setback in US (real) yields also took some shine of the dollar. DXY eased from the 105.3 area to close near 105.1. USD/JPY is holding close to the 147.95 recent top, but no new attack occurred, for now. EUR/USD initially didn’t go anywhere, but captured a better bid after the Reuters article on potential further ECB steps (close 1.0692). The latter move also propelled EUR/GBP back above the 0.86 level ( close 0.863).

Cryptocurrency Prices Rise on SEC Rumours

Various media outlets report the opinion that SEC Chairman Gary Gensler expressed in a personal conversation. He allegedly intends to approve applications for the creation of ETFs related to the cryptocurrency spot markets. Such applications were submitted by BlackRock, Invesco, WisdomTree, Valkyrie and other respectable funds. But for now, the SEC's decision on the applications has been delayed.

Markets Cautious Ahead Of Central Bank Decisions

The day before the BoE decision, the latest UK inflation figures will be published with economists forecasting CPI to rise 7.0%, up from the July print of 6.8%. Core inflation is projected to cool 6.8% year-on-year, down from 6.9% in the previous month.