The RBA is pretty much expected to raise rates by 50 basis points on Tuesday, investors will pay close attention to the possibility of further aggressive 50bps hike in October and November.
The Bank of Canada on the other hand, is looking for 75 bps on Wednesday, While it looks unlikely that BoC will continue to hike interest rate given Inflation appears to have peaked in the region.
The European Central Bank is expected to raise rates again by at least 50 basis points at its upcoming meeting. Euro inflation of 9.1% in August is well above analysts’ expectations and noticeably higher than the 2% target pressuring the ECB to curb it with aggressive rate hike. The rapid rise in cost of living is leading the markets to speculate a rate hike of 75 basis points this coming Thursday.
EURUSD has been on a downtrend for months, sellers should be cautious on the limited upside on Dollar and market might be forming a bottom at parity (psychological level), forming buy pressure ahead of ECB rate hike on Thursday. ECB’s hawkish shift suggests we might see euro gain.
Dollar Index Daily Chart
Federal Reserve chair Jerome Powell is due to speak on Thursday, traders are to look for whether the Fed is inclined with another 75 basis point hike or if 50 basis point hike is also an option. A hawkish Fed will further push the dollar to 110-115 trading range.
While the dollar’s aggressive rate hike is pressuring other currencies, most of the Fed members expected to see rates well above 3% by the end of the year.
Commodity and Energy
Gold has been trending down the 3rd week consecutively. Gold is looking to rebound to 1730s with weakening job growth and higher unemployment rate of 3.7% instead of the forecasted 3.5%. The main deciding factor for gold price in the coming weeks would be the FED’s decision on imposing a third straight rate hike of 75 basis point on 21st Sept. Investors should take note where higher yield increases the opportunity cost of holding gold, making gold unattractive to investors.
Supply side shortages will likely keep Oil prices above 85.5. OPEC is due to meet on monday with high probability of production cuts talks which might push oil back to last week’s high.
The uncertainty over the demand outlook from sluggish economic growth and Covid curbs by China keeps oil prices in check. If a strong selloff does happen, oil will find value buyers at $78 range.
Financial Market Analyst
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