<ul><li>Prior +7.9%</li><li>CPI +1.9% vs +1.3% m/m expected</li><li>Prior +0.3%</li><li>HICP +10.9% vs +10.0% y/y expected</li><li>Prior +8.8%</li><li>HICP +2.2% vs +1.3% m/m expected</li><li>Prior +0.4%</li></ul>

This article was written by Justin Low at forexlive.com.

<p>Headlines:</p><ul><li><a target=“_blank“ href=“https://www.forexlive.com/news/uk-pm-truss-we-are-not-the-only-ones-facing-difficulties-it-is-a-global-problem-20220929/“>UK PM Truss: We are not the only ones facing difficulties, it is a global problem</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/pboc-reportedly-called-major-state-owned-banks-to-stock-up-for-yuan-intervention-20220929/“>PBOC reportedly called major state-owned banks to stock up for yuan intervention</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/ecbs-kazaks-a-weak-euro-does-not-help-with-inflation-20220929/“>ECB’s Kazaks: A weak euro does not help with inflation</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/ecbs-rehn-significant-rate-hikes-are-needed-in-the-coming-meetings-20220929/“>ECB’s Rehn: Significant rate hikes are needed in the coming meetings</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/ecbs-rehn-small-rate-hikes-arent-enough-in-the-current-situation-20220929/“>ECB’s Rehn: Small rate hikes aren’t enough in the current situation</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/ecbs-mller-too-early-to-say-how-much-to-hike-in-october-20220929/“>ECB’s Müller: Too early to say how much to hike in October</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/ecbs-simkus-my-choice-would-be-to-hike-by-75-bps-20220929/“>ECB’s Simkus: My choice would be (to hike by) 75 bps</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/ecbs-de-cos-qt-could-potentially-cause-market-turmoil-in-certain-segments-20220929/“>ECB’s de Cos: QT could potentially cause market turmoil in certain segments</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/saxony-september-cpi-92-vs-73-yy-prior-20220929/“>Saxony September CPI +9.2% vs +7.3% y/y prior</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/bavaria-september-cpi-108-vs-84-yy-prior-20220929/“>Bavaria September CPI +10.8% vs +8.4% y/y prior</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/spain-september-preliminary-cpi-90-vs-101-yy-expected-20220929/“>Spain September preliminary CPI +9.0% vs +10.1% y/y expected</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/france-considers-power-cuts-for-parts-of-the-country-on-a-rotating-basis-report-20220929/“>France considers power cuts for parts of the country on a rotating basis – report</a></li></ul><p>Markets:</p><ul><li>USD leads, CAD lags on the day</li><li>European equities lower; S&P 500 futures down 0.7%</li><li>US 10-year yields up 12 bps to 3.825%</li><li>Gold down 0.6% to $1,650.23</li><li>WTI crude up 0.3% to $82.38</li><li>Bitcoin down 0.5% to $19,467</li></ul><p style=““ class=“text-align-justify“>After broad relief was seen in markets yesterday, we are seeing a return to old habits as bonds are selling off a fair bit while the dollar is running higher and equities are pushing lower. UK prime minister, Liz Truss, came out to defend the government’s policy plans and batted away any suggestions of U-turn in fiscal action.</p><p style=““ class=“text-align-justify“>Despite some nervous ticks higher in bond yields, 30-year gilt yields are little changed around 3.93% on the day. However, there is a notable selloff in Treasuries across the curve with 2-year yields up 11 bps to 4.20% and 10-year yields up 12 bps to 3.82%.</p><p style=““ class=“text-align-justify“>That kept the pressure on equities with US futures pushing lower after a solid bounce yesterday. S&P 500 futures are down 0.7% while European indices are also pressured lower as German inflation looks set to come in above 10% in September.</p><p style=““ class=“text-align-justify“>The dollar remains in a decent spot, recovering losses from yesterday as GBP/USD was pushed lower by 1% to 1.0765 initially before paring that loss and keeping around 1.0840-70 levels for the time being.</p><p style=““ class=“text-align-justify“>USD/JPY continues to keep buoyant, just below 145.00 with buyers slowly taking aim at the figure level again despite intervention fears. Meanwhile, EUR/USD was initially dragged down to a low of 0.9635 before holding at its 100-hour moving average and rebounding now to near unchanged levels at 0.9730.</p><p style=““ class=“text-align-justify“>Commodity currencies continue to stay under pressure with USD/CAD up 0.4% to 1.3660, though off earlier highs of 1.3755. Then, AUD/USD is down 0.3% to 0.6500 but at least moving off its low earlier as well at 0.6435 as the dollar gives a little bit back.</p><p style=““ class=“text-align-justify“>A report on the PBOC potentially intervening is also something to take note of, taking away part of the dollar’s tailwind with month-end trading also in focus.</p>

This article was written by Justin Low at forexlive.com.

<p style=““ class=“text-align-justify“>Just a heads up on this after the government has decided not to go through with a gas levy in fears that it will fuel a further price increase. A source earlier said that lawmakers have agreed to a significant but „responsible“ spending in dealing with the matter.</p>

This article was written by Justin Low at forexlive.com.

<ul><li>Rate hikes by major central banks raises recession risks</li><li>A big step in October is appropriate</li><li>ECB should start discussing QT now</li></ul><p style=““ class=“text-align-justify“>There’s a mix of comments in there but nothing that we don’t already know as being part of the ECB’s position at the moment. Policymakers from the central bank are out in droves today but the overall communique is clear i.e. 50 bps rate hike is the minimum for October but there’s a likelihood of raising by 75 bps as well.</p>

This article was written by Justin Low at forexlive.com.

<p style=““ class=“text-align-justify“>I’m not seeing any notable headline driving the move as this looks like just another swing in volatility for the pound this week. There is some notable short-term resistance just above 1.0900 but I would continue to pin the current range for the pair between 1.0600 and 1.1000 in the bigger picture.</p><p style=““ class=“text-align-justify“>The dollar continues to hold steady elsewhere, though gains have been pared slightly and not helped by this report <a target=“_blank“ href=“https://www.forexlive.com/news/pboc-reportedly-called-major-state-owned-banks-to-stock-up-for-yuan-intervention-20220929/“ target=“_blank“>here</a> as well, so this is more of a flow move in the pound. Broader <a target=“_blank“ href=“https://www.forexlive.com/terms/m/market-sentiment/“ target=“_blank“ id=“9c47bdfe-3721-43f4-97e8-fc0b97df4c60_1″ class=“terms__main-term“>market sentiment</a> also continues to be on edge with S&P 500 futures down 0.7%, European indices down roughly 1%, and bond yields pushing higher today. 10-year gilt yields are up 16 bps to 4.16% while 10-year Treasury yields are up 13 bps to 3.84% currently.</p><p style=““ class=“text-align-justify“>As for the pound, we heard from UK PM Truss that she’s not backing down from her recent policy initiatives and that is a clear signal for a couple of things.</p><p style=““ class=“text-align-justify“>If the gilt market continues to come under further pressure, it would require more effort by the BOE to try and restrain the market and provide more bailouts. In essence, it has to step in with some form of yield curve control.</p><p style=““ class=“text-align-justify“>That just points to further decimation for the pound on the balance of things and rightfully, it should require the government to be more fiscally responsible and embrace austerity. Otherwise, the contradicting policies between the government and central bank will just make for a disastrous recipe in terms of financial stability and confidence in the UK economy.</p>

This article was written by Justin Low at forexlive.com.

<p style=““ class=“text-align-justify“>Easy come, easy go. The BOE announcement brought some relief to broader market sentiment but it is proving temporary as equities are falling back lower now on the day. 10-year Treasury yields were down 7 bps to 3.895% earlier but have also pared the move in a push back to 3.965% currently.</p><p style=““ class=“text-align-justify“>That’s not a good look ahead of the Wall Street open, as even major intervention by the BOE in trying to address the source of uncertainty in markets this week isn’t doing the trick.</p>

This article was written by Justin Low at forexlive.com.

<p style=““ class=“text-align-justify“>After a bit of a whipsaw on the initial announcement from the BOE, the pound is now settling lower as traders digest the situation. Cable rose to a high of 1.0838 amid the whipsaw but has fallen down by 1.5% to 1.0570 as the dust begins to settle.</p><p style=““ class=“text-align-justify“>10-year gilt yields have also come back up now to 4.30% after having been down to 4.10% earlier, though still lower by 20 bps on the day.</p><p style=““ class=“text-align-justify“>Going back to the pound, what exactly does the BOE announcement entail for the currency?</p><p style=““ class=“text-align-justify“>A return to QE (well, sort of) isn’t exactly ideal at a time when we are seeing an <a target=“_blank“ href=“https://www.forexlive.com/terms/i/inflation/“ target=“_blank“ id=“ad51a5a2-1afc-4f42-9e62-ea6faf6f90fa_1″ class=“terms__main-term“>inflation</a> shock in the economy. Ultimately, I believe traders are that simple with their conviction. As much as this provides some level of calm and financial stability – which is supposed to be the benchmark for any developed market, it is no game changer to the overall situation in the UK economy.</p><p style=““ class=“text-align-justify“>Add that to the fact that the dollar continues to be on a rampage, it’s hard to imagine this being a pick-me-up for cable. The downside pressure will continue so long as the Fed and BOE are at odds in terms of their policy convictions. I’ve repeated that for many months now.</p><p style=““ class=“text-align-justify“>If anything, the BOE announcement today just adds more scrutiny for the pound and that will put it firmly in the crosshairs of traders waiting to capitalise on another rout in the gilt market.</p>

This article was written by Justin Low at forexlive.com.

<ul><li>Prior +3.8%</li><li>Market index 254.8 vs 264.7 prior</li><li>Purchase index 199.3 vs 200.1 prior</li><li>Refinancing index 524.1 vs 588.1 prior</li><li>30-year mortgage rate 6.52% vs 6.25% prior</li></ul><p style=““ class=“text-align-justify“>The average interest rate on the most popular US home loan climbed further in the past week to 6.52%, its highest level since August 2008. The rise in mortgage rates is continuing to take a heavy toll on activity and the housing sector as purchases and refinancing both fell as well with the latter index sliding to a 22-year low.</p>

This article was written by Justin Low at forexlive.com.

<p style=““ class=“text-align-justify“>10-year gilt yields have tumbled significantly since the announcement, down 40 bps on the day now to 4.10%:</p><p style=““ class=“text-align-justify“>The BOE has backed down from QT and then some in their latest announcement, offering to buy government bonds „temporarily“ in order to try restore order and function in the gilt market. And so now, we have rate hikes and QE (well, sort of) at the same time with the UK now joining Europe and the ECB.</p><p style=““ class=“text-align-justify“>In any case, the takeaway from the past week is essentially policy incoherence from the UK and this just adds to that. Sure, there were signs of dislocation and dysfunction with the gilt market and the BOE action today will help with that. However, is it really a be-all, end-all solution?</p><p style=““ class=“text-align-justify“>I want to say that I’m on the fence but in all honesty, I’m leaning towards a hard no.</p><p style=““ class=“text-align-justify“>I mean, when a central bank has to step in with major intervention in the bond market as a result of government policy and not some of external shock, something is deeply rotten at the core. That of sort of dynamic in itself is dysfunctional.</p><p style=““ class=“text-align-justify“>This is essentially a band aid solution in trying to restore confidence in the gilt market but unless it is accompanied by some change or backing down on the fiscal side, it is hard to see this as being a turning point for UK assets.</p><p style=““ class=“text-align-justify“>If Kwarteng is going to keep doing Kwarteng things and the BOE has to come out to put out the fire in every instance, it’s not exactly a picturesque graphic of the UK economy – especially when you have to consider that the central bank has to run against its own policy resolve in trying to fight high inflation pressures.</p>

This article was written by Justin Low at forexlive.com.

<p style=““ class=“text-align-justify“>There might not be much in terms of monetary policy remarks from Powell today as the topic that the panel is speaking about is more related to digital finance and DeFi. You can watch the discussion here:</p><p>Or at this link <a target=“_blank“ href=“https://www.youtube.com/watch?v=r_9GrgvNkxY“ target=“_blank“ rel=“nofollow“>here</a>, in case the video above isn’t working.</p>

This article was written by Justin Low at forexlive.com.