Markets have been choppy this week as multiple narratives jostle for supremacy. Is a Chinese slow down going to send markets into a risk-off mood or was it OPEX expiries on Friday the reason for equity selling this week? Were US treasuries bought on the US CPI miss this week or was summer trading to blame for choppy markets? Are rising COVID-19 cases a concern once again for markets or the Fed’s monetary policy? With so many narratives at work this week it is not surprising that choppy price action has dominated. However, the Fed meeting next week should generate some direction and certainty, especially for the USD and gold. All eyes on the Fed for next week!
Other key events from the past week
- USD: inflation miss, Sep 14: The US CPI print was a miss this week. This means the Fed are very unlikely to announce tapering next week. However, the USD still rallied out of the weak print on risk-off tones. Remember that the USD sometimes rises on risk-off sentiment. Check out the dollar smile theory here.
- GBP: Inflation surge, Sep 15: Although the BoE has signalled no interest rate rises until 2022, the more inflation rises the greater pressure there will be on the BoE to hike earlier. This should keep the GBP supported medium term.
- USD: Retail sales, Sep 16: The USD surged higher after a surprisingly strong August retail sales report. If there is one adage true in the financial markets it is this, ‘never bet against the US consumer’. USDCHF moved sharply higher on Thursday and gold sank lower on the report.
Key events for the coming week
- USD: US interest rate meeting, Sep 23: This is the main event of the week and the question will be whether the Fed signals bond tapering. In this webinar, we will outline how markets will be expected to react to the Fed’s decision.
- Seasonal trades: FTSE 100, Sep 24: The FTSE 100 has risen 16 times in the last 21 years between September 24 and January 01. Time for a medium-term buy into the FTSE 100? Check out the strong seasonal pattern here.
- GBP: UK interest rate decision, Sep 23: All eyes on the BoE for Thursday and whether or not the BoE will signal more than the two interest rate hikes next year. Make sure to read the statement carefully for any clues as to whether the BoE is moving closer to interest rate hikes after this week’s inflation rise.