This week was dominated by the hot US inflation print on Tuesday. Markets were expecting another dip lower in US inflation, but the headline and the core readings came in at the high end of expectations sending stocks and bonds sharply lower and the USDJPY higher. Midweek UK inflation printed a little lower than anticipated and this should alleviate some of the UK’s stagflationary concerns in the near term ahead of the BoE’s meeting next week. The medium-term picture for stocks is incredibly difficult to anticipate in these current markets and trading short-term catalysts seem the best approach with so many uncertainties. All eyes are now firmly on the Fed for next week.

Other key events from the past week

  • USD: Hot US Inflation, Sep 13: The headline (8.3% vs 8.1%) and the core readings (6.3% vs 6.1%) came in at the high end of expectations for US CPI and this led to calls for a 100bps hike from the Fed next week.
  • JPY: BoJ intervention ahead? Sep 14: Just after the hot US CPI inflation sent USDJPY higher there was increased speculation that the BoJ would act against JPY weakness. Japan’s finance minister says if Japan was to intervene it would do so without pause sending out another verbal warning to speculators.
  • GBP: UK inflation, Sep 14: UK inflation came in softer than expected at 9.9% vs 10.2% expected. This allowed the GBP to gain against the EUR and the USD shortly after the release and will likely take some pressure off the BoE next week.

Key events for the coming week

  • USD: Rate decision, Sep 21: The short-term interest rate market is now expecting a 79% chance of a 100bps hike next week. Will the Fed deliver such a sharp increase or will they surprise markets with only a 50bps hike?
  • Silver slide: Will silver resume its slide again this week post-hot US inflation?
  • GBP: Delayed rate decision, Sep 22: The BoE’s postponed meeting, after the death of the UK Queen, is expected to see a 50bps hike delivered. However, with UK inflation printing lower than expected this week, will the BoE show signs of slowing its terminal path of rate hikes?

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