What are the main events for today?
EUROPEAN SESSION
In the European session, the only highlight is the German CPI, which is expected to show a yearly increase to 3.0% vs 2.8% prior. It goes without saying that the core measure will be more important. Overall, the data shouldn’t change anything for the ECB, so the market reaction will likely be muted.
As a reminder, the ECB is widely expected to hike by 25 bps at the upcoming meeting, bringing the policy rate to 2.50%. This was also confirmed by “ECB sources” saying that policymakers are ready to raise rates to stem effects from US-Iran war, but added that there’s little appetite to signal further tightening.
AMERICAN SESSION
In the American session, we don’t have much on the agenda other that the Dallas Fed Manufacturing PMI, which is expected at 1.60 vs 1.30 prior. This is a low-tier indicator and never a market-moving release.
The market is currently repricing Fed interest rate expectations after Warsh’s hawkish speech at the Jackson Hole Symposium. The key passage was him saying “I would be hard pressed to describe broad financial conditions as restrictive”. The market interpreted that as him leaning against the recent easing in financial conditions and, therefore, retightened them.
This process has, of course, extended the corrections in the “debasement” trades, with the US dollar and gold basically returning to pre-US Treasury announcement levels. The rate hike probabilities for the September meeting have also increased, with the market now seeing a 60% chance of a hike. I think that’s going to be decided mostly by the next US CPI report on September 11.
This article was written by Giuseppe Dellamotta at investinglive.com.
